A 15% uniform value added tax (VAT) for all businesses will be a tool for harassment, especially for small and medium enterprises, business leaders have claimed. Experts are saying the new VAT law will be very tough to implement because businesses and the system are not ready yet. Small businesses do not have the capacity to maintain accounts at several levels of purchase, Md Shafiul Islam, first vice president of the Federation of Bangladesh Chamber of Commerce and Industries (FBCCI) told the Dhaka Tribune. As a result they will fail to show the documents needed to enjoy the intended rebates, he argued. “It will only be a tool for the concerned authorities for the harassment of businesses,” he said. “It will create anger among the people and will keep them from participating in the VAT process,” Shafiul added. He urged the government to introduce package VAT for small businesses as they contribute a lots to the national economy and generate employment especially for rural people. The business leader urged the government to introduce multiple rates of VAT in the next budget. “I think a 15% VAT is too high and it should be 10%,” economist AB Mirza Azizul Islam told the Dhaka Tribune. The former finance adviser to caretaker government admitted that a unified VAT rate was ultimately needed but businesses, especially small entrepreneurs, were not ready and capable of maintaining accounts. “If it is made mandatory it will be very tough to implement,” he said. If the uniform rate is reduced to 10%, it will help increase willing participation of the people as well as collection, he added. However, Islam opposed the ceiling, saying it would create an opportunity to manipulate and to evade VAT. “But there should be an exemption limit for small businesses,” he added. “It is quite impossible for small entrepreneurs to maintain accounts because it costs a lot to employ accountants. If the new VAT law is implemented with a 15% unified rate, it will not increase government revenue. It will increase harassment for businesses instead,” Abdus Salam, president of the Baboshayee Oikko Forum (Business Unity Forum) told the Dhaka Tribune. He argued that businesses would have to pay bribes instead of VAT as officials will take advantage of them for lacking proper documents. Baboshayee Oikko Forum is a platform of various business associations formed to put pressure on the government to materialise several demands including package VAT. “If the government wants to see the development of an SME sector, it will have to keep package VAT in the law for the sector. Otherwise, small manufacturers will lose confidence due to production cost,” Monjur Ahmed, a VAT expert and FBCCI adviser, told the Dhaka Tribune. This will cause mport dependency to rise and create a crisis of employment, he said. He also sought a permanent solution to the VAT rate issue. The Parliament in 2012 passed the law to automate the VAT administration and increase revenue collection. The act will come into effect from July 1, 2016 after unveiling it in the parliament during the announcement of the budget for the fiscal year 2016-17 on June 2. Following the initiative, the National Board of Revenue in 2013 undertook the VAT Online Project to ensure a taxpayers-friendly and service-oriented automated system. But the law has already drawn widespread criticism from different quarters, mostly from leading business associations, as it will impose a uniform 15% VAT on all products and services, removing existing multiple rates. The law will have no provisions for package VAT or the truncated value-based VAT system. With the introduction of the law, all levels of business will have to pay a unique and single VAT rate at 15%.

Prime minister Sheikh Hasina on Sunday reassured that the door of Bangladesh is open for the Japanese investors as she said that some recent incidents won’t frustrate investment climate. Addressing a breakfast meeting with the Japanese business leaders in Tokyo, she also urged the Japanese entrepreneurs to invest in various sectors by taking advantages of huge youthful workforce and emerging opportunities in Bangladesh. ‘Let me again assure you: my door is open for you. I want our Japanese friends to take advantage of our youthful workforce and emerging opportunities in Bangladesh,’ she said. In this connection, Hasina informed that she has instructed the authorities concerned to ensure the highest possible security for the Japanese individuals and installations operating in Bangladesh. ‘You surely are pondering about safety and security of investors and foreign nationals because of some incidents in Bangladesh in recent times. I would assure you that my government has a zero tolerance for any form of terrorism or extremism,’ she said. The prime minister also highlighted the scopes for effective collaboration between Bangladesh and Japan in various sectors. ‘The readymade garment and agricultural sectors as well as in developing industries, infrastructure and collaboration in energy, water resources and waste management are major explorable areas,’ she said. As the Japanese society moves into a ‘robotic evolution’, she said, Bangladesh economy will have much to collaborate in areas like ‘imaginative software’, ‘shared/cloud-based processing’, evolving generic computing architecture. ‘Our pharmaceutical and shipbuilding sectors are new frontiers that may interest you. Our “Blue Economy” offers a large menu of opportunities,’ she said. Pointing out that Bangladesh is basically opening up new production possibility frontiers, Hasina said her government has planned to establish 100 Special Economic Zones and several IT Parks. ‘The work on 33 of those is already in progress,’ she said. In four years’ time, she said, the government expects to have additional 10 million of Bangladesh population in industrial manufacturing, she said. The premier mentioned that Bangladesh’s light-engineering products could be fed into Japanese heavy industries and ancillary commodities that can help the position for markets in India and around. Noting that many factories and infrastructures will need retro-fitting where Japan is a global leader, Hasina said that Japan can also step in meeting needs for Bangladesh’s energy-intensive, climate-resilient, water-intensive, solid waste-processing and low-wastage power distribution. She said currently, Bangladesh is working on launching its Sovereign Bond while more debt and equity instruments are coming up. One way forward could be for more Japanese banks in Bangladesh, Japanese investments in Bangladesh businesses, she opined. Hasina said the government is also workingon establishment of an effective ‘one stop service’ facility. ‘I will be happy to respond to your requests for incentive packages, connection and supply of energy and utilities, relaxation of certain tax provisions,’ she said. Among the Japanese business leaders, Terau Asada, chairman, the Japan-Bangladesh Committee for Commercial and Economic Cooperation, Hiraoki Otani, director and executive vice president, Fastening Products Group, YKK Corporation, Kazuyuki Inoye, president and director of Shimizu Corporation, Hiroyaki Ishiqa, chairman and CEO of Japan External Trade Organisation, Masahi Munoshi, director and CEO of Toshiba Corporation and Shnizi Ayenua, operating officer and director, Honda Motor Corporation, spoke at the meeting. After the breakfast meeting, Federation of Bangladesh Chambers of Commerce and Industry and Japan External Trade Organisation signed a memorandum of understanding (MoU) on promoting bilateral trade and investment, particularly in the private sector. FBCCI president Abdul Matlub Ahmad led a 30-member FBCCI team, as entourage of the prime minister, to the G7 Outreach Meeting.

Bangladesh RMG makers at a WTO dialogue beginning in Geneva today will strongly place their demands, seeking the global platform’s initiative to put forward the agenda of duty-free market access to the developed country. The World Trade Organisation director general Roberto Azevedo invited 20 business leaders from across the world to join the WTO Dialogue with Business to discuss opportunities and challenges that the businesses faced and how the WTO can help. Bangladesh Garment Manufacturers and Exporters Association president Siddiqur Rahman is taking part in the dialogue and he would strongly demand WTO steps for duty-free quota-free market access for the least developed countries as per the Hong Kong declaration. The BGMEA leader will express his worry over the delay in Doha round outcomes and growing number of regional trade agreements instead of multilateral rules-based trading system. Mahmud Hassan Khan, vice president of the BGMEA said that Bangladesh wants to see the effective steps from the WTO to ensure duty-free market access in the US and other nations like Russia, South Africa, Brazil and Argentina. He said that BGMEA also wanted to inform the global platform that the Trans Pacific Partnership, an initiative of 12 developed countries, would create adverse impact on trade for least developed countries like Bangladesh. In the dialogue, the BGMEA president would urge the WTO to take lead role to ensure enough policy protection for the LDCs as trade agreement like TPP limited space for the LDCs and distorted the level playing field. Bangladesh will put pressure on the WTO to ensure commercially meaningful market access to all LDCs as the US remained the only developed country to deny duty-free market access to Asian LDCs though Sub-Saharan and Caribbean LDCs enjoy the duty-free market access to the country. In the dialogue, BGMEA president will also present the post Rana Plaza scenario of readymade garment sector in Bangladesh.

The decision for creation of Central Fund for the readymade garment (RMG) sector, though belated, is an important milestone in the country’s labour welfare programmes. The government, in keeping with the amended Labour Law 2013, has announced the modalities of generating the fund and its utilisation, to be made effective from the first day of the ensuing fiscal year (FY) — July 01, 2016. The disclosure came at the first meeting of the board of the fund, formed last month for determination of contributions from the export-oriented garment factories and realisation procedures and provisions for utilisation of the money for welfare of RMG workers. The government, according to the decision, will start collecting 0.03 per cent of free-on-board (FoB) prices from the readymade garment factory owners from July 01 for depositing the money in the Central Fund formed for the export-oriented RMG sector. The labour rules that came into effect in September, 2015 stipulates that the export-oriented factories have to contribute 0.03 per cent of their FoB prices to the fund while the contributions from the government and the buyers are voluntary. The money will be deposited equally in the two accounts — one will be beneficiary account and the other, contingency account. Grants for workers or their family members will be taken from the beneficiary account while the amount deposited in the contingency account will be used to meet the dues of workers of any closed factory if its owner is unable to pay the workers. The premium of group insurance and health insurance would be paid from the contingency account. From the beneficiary account workers would get up to Tk 3.0 hundred thousand for death or permanent disability due to accident in work place and up to Tk 2.0 hundred thousand for illness. For a mammoth export-oriented sector like the RMG employing around four million workers, it is indeed surprising that it took so long to put in place a workers’ welfare scheme that can really take care of the workers in bad times. No wonder, it is the enactment of the labour law that made it mandatory for the export-oriented units to part with a minuscule of their earnings towards generating the fund. It is, however, not known whether any other export-oriented sector has announced its plans in line with the RMG sector. Providing such welfare schemes is by all means indispensable to the operation of any industrial sector. While it may not always be possible for an individual unit to create funds for the well-being of its workers, a sectoral arrangement to be overseen and implemented by the respective industry association can be a befitting way of doing so. Now that the Bangladesh Garment Manufacturers and Exporters Association (BGMEA) has pioneered the move, it is expected that other industry associations will be forthcoming in following suit. Besides creating an example for labour welfare, this move will go a long way towards gradually bringing the whole range of labour issues, so long shelved or addressed only partly, under active consideration of all concerned.