Fiscal incentives versus economic gains  

Isn't it time to seriously examine the link between the returns from the country's industrial sector and the huge sums of money dished out every year in the form of duty exemptions and a host of other fiscal benefits by the government? A FE report the other day came up with a detailed picture of various fiscal incentives doled out to various sectors in the recent years. The amount is astronomical, and so the immediate reaction of a conscious citizen is likely to be the obvious: what the economy gets in return, or is it worth parting with huge NBR revenue? The government handed out around Tk 1.47 trillion in the form of tax exemptions at import stage to various sectors since 2014-15 until January last. The amount of tax waived is nearly half the current fiscal's total tax collection target of Tk 2.96 trillion. The afore-mentioned FE report, quoting data from various government sources, said the volume of taxes in the form of exemptions has been increasing every year since FY 15. In FY 2014-15, the NBR granted tax exemptions to the tune of Tk 210.70 billion at import stage, which doubled in FY 2017-18.

It is a regular feature that businesses in the country are ever eager to look up to the government for incentives -- mostly in the form of tax waivers. The government, too, is accustomed to viewing such waivers as trade facilitating actions that can lower costs, boost production and increase exports. This is a historical phenomenon prompted initially by the need of state support, especially fiscal support, for infant industries to compete with imported goods in the domestic market and also to find an edge in overseas markets. However, although the manufacturing sector has changed a good deal over the past decades, the culture of incentivising by fiscal concessions is still quite pervasive. What appears to be behind this could perhaps be the perception that facilitation essentially calls for fiscal rebate, concessions and even outright waivers. But this is not necessarily the case, because facilitation through various infrastructure upgrades, removing bureaucratic bottlenecks, subsidised transportation cost, expansion of credit facility etc can also weigh substantially in favour of equipping an enterprise better.

As a least developed country (LDC), Bangladesh has been under no major pressure from the World Trade Organisation (WTO) to discontinue fiscal benefits. While this makes a case for the industrial sector, particularly the export-oriented sector, to keep asking for increasing rebates, the fact remains that there has not been any methodical research on the amount of money the country loses vis-à-vis the gains from exporting or the direct or indirect benefits enjoyed by consumers. Moreover, there are instances of abuse -- allegedly significantly -- in enjoying tax holiday by some exporting sectors.

It is true, quantifying the benefits of the economy from such exemptions is not easy. Attempts, however, may be made to see whether an enterprise gained, and if yes, how much from fiscal incentives and duty exemptions in respect of some broad parameters such as boosting productivity, overseas marketing and export remittance.