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Tax-break end may threaten tech startup survival

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The country’s tech-startup entrepreneurs have expressed concern over their sustainability if their tax break ends on June 30, 2024.

They said the government’s vision to build Smart Bangladesh might be affected if the software and technological sector faces any blow.

As per income tax law, the tax exemption for the IT-enabled sector is scheduled to expire on June 30, 2024.

The entrepreneurs demanded an extension of the tax exemptions until 2041, aligning with the government’s digital Bangladesh vision.

They said the tax incentive for the start-up technological sectors is not causing any significant revenue loss compared to its contribution to employment generation and investment outputs.

In a roundtable in the city on ‘Tech-Start-up: Income Tax Policy Support’, some 20 start-up businesses sought the government’s support to help them sustain with the tax incentives.

Tax experts and leaders of the Bangladesh Association of Software and Information Services (BASIS) also echoed the same sentiment.

Tech entrepreneurs said neighbouring countries are offering tax incentives to encourage investment in tech startups.

During the last five years, the tech sector has attracted some $1.0 billion in investment, which may drive people away to other countries if the government withdraws tax exemptions. Also, software developers may not be willing to bring their export earnings to Bangladesh, which may mount pressure on the country’s foreign exchange reserve.

Moderator of the roundtable former President of BASIS Fahim Masroor said the revenue board’s estimated loss worth Tk 14.70 billion in tax with the tax exemption to the IETS sector is not based on reality.

Given the estimation, the tech companies are gaining Tk 50 billion in profits every year, while in reality the profit margin is not above Tk 10 billion, which may generate Tk 3.0 billion in revenue annually, he said.

He urged the government to conduct surveys at the company level to determine the profitability of businesses in this sector.

Former president of BASIS Shamim Ahsan acknowledged the government’s policy support to help the technological sector grow, which has just started paying off.

“We don’t expect tax exemption for an unlimited period, but this is not the right time to scrap the tax benefit as additional revenue would be lower than the tax loss in the next five to ten years,” he projected.

Entrepreneurs may leave the country and invest in another attractive destination, which affects employment generation, he added.

Senior Vice President of BASIS Zuberi Himika said the government can take the support of local tech entrepreneurs to develop an automated system and a simple tax collection system.

Director of Venture Capital Association Shawkat Hossain and policy research organisation IID chief Sayeed Ahamed spoke on the programme.

Tax expert Snehasish Barua presented the keynote paper in the programme.

 

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