Foreign Investors’ Chamber of Commerce and Industry (FICCI) has sought to reduce corporate tax and reform of banking sector to foster a more favorable business environment.
The investors came up while a delegation from the FICCI, led by President Zaved Akhtar, presented a series of critical recommendations aimed at reforming Bangladesh’s financial sector during a meeting with Finance and Commerce Adviser Dr. Salehuddin Ahmed on September 29, 2024, at his office.
The delegation urged the government to implement necessary reforms, including banking sector improvements, better tax-revenue administration, and a reduction in corporate tax burdens, particularly in the banking sector, to foster a more favorable business environment.
During the meeting, Dr. Salehuddin Ahmed expressed the government’s commitment to working with foreign investors to drive economic growth. He emphasised that increasing foreign direct investment (FDI) is essential for the country’s sustained progress.
“Without the private sector, the country cannot make significant progress,” he said, underlining that economic reforms must go hand in hand with public-private collaboration. The adviser also acknowledged the role of foreign investors in propelling the economy forward and stressed that the government was open to exploring necessary reforms to create a more attractive environment for both local and foreign businesses.
Dr. Salehuddin highlighted the vital role of the private sector, especially foreign investors, in contributing to Bangladesh’s economic growth.
He noted that Bangladesh is at a critical juncture, with potential for rapid industrial expansion, but stressed that this could only be realised through concerted efforts from both the government and private enterprises.
“The collaboration between the government and private sector is key to unlocking the potential of our economy,” Dr. Salehuddin remarked, emphasizing that public-sector initiatives alone would not be enough to achieve the ambitious targets for growth and development.
He assured the FICCI delegation that the government was dedicated to making the country’s financial and regulatory framework more conducive to business.
The adviser also pointed out that while the government recognizes the challenges businesses face due to the current tax and regulatory environment, steps would be taken to review and address these issues, particularly concerning tax administration, corporate tax, and banking regulations.
Dr. Salehuddin also highlighted the government’s broader economic goals, which include increasing the tax-to-GDP ratio, improving public revenue generation, and ensuring the stability of the financial system. He emphasised the need to balance economic reforms with social considerations, ensuring that growth benefits are distributed equitably across the population. The adviser expressed optimism that with the right reforms, Bangladesh could become a more competitive destination for foreign investors, particularly in sectors like manufacturing, banking, and technology.
FICCI President Zaved Akhtar presented a detailed plan during the meeting, outlining several key recommendations that would help improve the business climate. Among the primary suggestions were:
FICCI urged the government to overhaul banking regulations to make the system more efficient and transparent. They recommended the adoption of world-class regulatory technology to increase administrative efficiency and reduce bureaucratic delays, which would ultimately make Bangladesh a more attractive destination for investors.
FICCI highlighted the need for reforms in tax-revenue administration, particularly concerning the punitive corporate tax structure.
The overseas business body emphasized that high corporate taxes, especially in the banking sector, are deterring investment. The delegation also recommended simplifying tax procedures, including the elimination of banks’ responsibility to deduct taxes at source for customers’ direct tax payments, proposing instead that taxpayers bear the responsibility for their own tax obligations.
The delegation raised concerns about the additional withholding income tax imposed on interest payments earned by non-resident institutions from foreign currency borrowing. They argued that this increases borrowing costs for Bangladeshi businesses and recommended a reduction in these taxes to make the country’s financial system more competitive.
FICCI called for the implementation of strategies to increase the tax-to-GDP ratio, primarily through more efficient tax collection and streamlined processes. They argued that making the tax system easier to navigate would encourage compliance and ultimately lead to higher public revenues.
The delegation also stressed the importance of maintaining law and order to create a safe and stable environment for businesses to operate. They pointed out that security concerns can deter potential investors and urged the government to ensure a peaceful and conducive business environment.
In response to FICCI’s recommendations, Dr. Salehuddin reiterated the government’s commitment to working closely with the private sector and implementing reforms that would create a more favorable environment for businesses. He assured the delegation that their concerns would be addressed and highlighted the government’s intent to make Bangladesh a leading destination for FDI in the region. He also reaffirmed that Bangladesh’s interim government remains focused on ensuring policy stability and continuity, which is crucial for attracting long-term investment.
The meeting saw the participation of several key members of the FICCI Board, including Naser Ezaz Bijoy, Ala Uddin Ahmad, Najith Meewanage, Faisal Ahmed Chowdhury, Rubaba Dowla, and M.H.M. Fairoz.
