The Foreign Investors’ Chamber of Commerce and Industry (FICCI) has urged the government to adopt consistent policies to attract new foreign direct investments (FDIs) to the country.

“We have concerns regarding the additional duties and taxes imposed on telecom, carbonated beverages, and water purifiers, because the increased taxes for manufacturers pose a crucial challenge to the profitability of these businesses and they will hamper attracting potential FDI,” FICCI President Zaved Akhtar said at a post-budget press meet in a Dhaka hotel on Monday.

The FICCI chief called for focusing on financial sector reforms, which is critical for a strong and resilient financial system. He also highlighted Bangladesh’s low revenue-to-GDP ratio, and stressed the need for improvement in the revenue collection system.

Around 10 percent of the population contributes 40% of the national income, according to the Household Income Survey. The National Board of Revenue (NBR) has 10 million registered taxpayers, which is way lower than the actual number of people needed to be brought under the tax net, added Akhtar.

FICCI suggested innovative approaches, such as sector-wise revenue analysis and increasing the taxpayer base. The foreign investors’ chamber welcomed the acceptance of their proposed amendments in the Finance Bill 2024, particularly the prospective tax rate, as the business community has been demanding them for a long time.

FICCI also expressed its gratitude for the acceptance of their proposed amendments for simplifying the system of tax deduction at source (TDS) for industrial raw materials and the extension of time for monthly tax return submission in the Finance Bill 2024.

The platform of foreign investors appreciated tax reforms to simplify the tax system in the proposed 2024-2025 budget. But high Effective Tax Rates (ETR) remains a key concern for the industry, it said.

While they appreciated the 15% income tax rate for private funds, they expressed their concerns about exempting public funds from taxation, as it would create disparities between government and private sector employees.

Removing incentives at private export processing zones (EPZs) and high-tech parks, while keeping them at government EPZs and high-tech parks may erode investors’ confidence, said Akhtar, chairman of Unilever Bangladesh.

Moreover, NBR has proposed an increase in personal income tax rate, which may be seen as unfair by regular taxpayers and could inadvertently encourage tax evasion, said FICCI.

Such changes in tax slab will discourage compliant taxpayers as they are being penalised for their hard earned money. Besides, making this retrospective is against NBR’s current policy of predictive tax culture, according to FICCI.

FICCI also expressed concerns about NBR’s capacity to collect the mammoth fund of Tk4.8 lakh crore as revenue, around 60 percent of the proposed budget, within one year.

“The proposed budget lacks allocation or guidance for automating Tax, VAT, and customs administration, which would simplify tax collection and enhance efficiency. Without these reforms, VAT credit complexities and financial strain on businesses may persist. Changes in TDS compliance, like including entities above Tk10 crore under withholding authority, are crucial,” read the FICCI statement.

Reforms, such as merging the three wings of NBR (Income Tax, VAT and Customs), separating the collection department from policy department and implementing the National Single Window (NSW) project to help enforce the law properly are necessary to streamline tax and VAT collection processes, reduce administrative burdens, improve productivity, and encourage compliance to support economic growth, said the organisation.