The Financial Express

In lieu of fiscal incentives

Published: January 29, 2020 20:37:14 | Updated: January 31, 2020 21:22:12

In lieu of fiscal incentives

Fiscal incentives for various industrial sectors have for long been treated as a key facilitating measure of the government. The idea being that such facilitation would on one hand help the concerned sectors survive and even thrive, and on the other bring gains for the economy. However, 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 - at the expense of NBR revenue?

Reports say 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 December last. 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 2018-19.

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 scenario 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, removal of bureaucratic bottlenecks, subsidised transportation cost, expansion of credit facility etc can also weigh substantially in rendering an enterprise better equipped.

As a least developed country (LDC), Bangladesh is 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 the 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 industrial sector 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. It is high time businesses realised that they should press upon the issues that really have a bearing on their functioning for both domestic as well as international marketing.

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