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Monday, June 1, 2009

Black money whitening facility likely to continue

The New Age : Tax holiday, black money whitening facility likely to continue

The cabinet in its scheduled meeting today is likely to give green light to continuation of tax holiday and the facility to whiten black money despite abuses of the schemes in the past which caused huge revenue losses to the government.Officials of the finance ministry said settlement of the issues was important as they would be incorporated in the forthcoming budget.

In the past, the finance ministry took the decision on its own but this time it has sent the proposals to the cabinet to avoid ‘controversies’.Besides, the ministry has also sought a cabinet decision on the ‘controversial’ pre-shipment inspection system and pay hike for public servants.

An official of the National Board of Revenue told New Age that the government had little scope to discontinue the tax holiday facility, under which industrial units of local and foreign entrepreneurs enjoy income tax and duty exemption for a certain period of time.The government can only decide not to bring any new sector under the tax holiday facility, he said.

At present 18 industrial sectors such as textile, jute goods, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, fertilisers, sea or river ports, container terminals, internal container depots, gas pipelines and flyovers are entitled to enjoy tax holiday until 2011.Some 352 newly set up industrial units have received tax holiday facility in the last four fiscal years causing a revenue loss of nearly Tk 500 crore to the NBR.

A recent NBR survey revealed that 90 per cent industrial units which enjoyed tax holiday since mid-1990s, abused it as they showed ‘no profit’ after expiry of the facility.Another survey conducted by NBR in 2005 found that 902 companies had enjoyed tax holiday between 2000 and 2004 which led to revenue losses of Tk 847 crore to the government.Successive governments tried to suspend the facility, but failed to so because of pressure and lobbying from the industrialists.

Former finance adviser Mirza Azizul Islam said there was no justification for continuing tax holiday as it was widely used as a tool to evade taxes.Finance minister AMA Muhith termed the tax holiday as a big hurdle to expanding the country’s income tax base. ‘There should not be cent percent tax waiver,’ he said.

Opposing the finance minister’s view, chairman of the parliamentary standing committee on finance, AHM Mostafa Kamal, said businessmen still needed the facility to continue the process of industrialization.Annisul Haq, president of the country’s apex trade body FBCCI, said the government should take stringent measures to curb the abuses of the incentive. Suspension of the facility is not an answer, he said.

Businessmen are also pressing for continuation of the facility for whitening black money.Today’s cabinet meeting will select the sectors like toys, shoes, pharmaceutical, cement and real estate in which investment of black money is likely to be allowed in the next fiscal year.

The government provided black money whitening facility several times for a total period of 11 years over the last 36 years. Some Tk 8,908 crore in black money was injected into the formal economy during the period.



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