The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) is lobbying the National Board of Revenue (NBR) to simplify the rate of tax deducted at source payable on import letter of credit (L/C) transactions.

This is one of several measures the FBCCI has proposed that, if they are accepted, would result in a major reform of the tax regime.

Complex tax scheme

The FBCCI wants the NBR to eliminate the various rates applied to tax deducted at source.

Businesses are paying source tax on a product several times over according to the federation, which says this prompts them to conceal business transactions.

Rate changes

The source tax is currently applicable at a rate of 3 per cent on L/Cs, 5 per cent on L/C commission and 5 per cent on the value of imported products. The federation says it is difficult for businesses to obtain refunds or tax adjustments.

The FBCCI is proposing fixing the source tax rate at 2 per cent for simplification.

More reforms

Other reforms proposed by the federation include a restructuring of import tariffs and duty payable on basic raw materials and intermediate goods.

The FBCCI also wants the NBR to reduce corporation tax rates for banks, insurance companies and other financial institutions from 37.5 per cent to 35 per cent.

Laboured L/C processing

Earlier this year Japanese delegates at a Japan-Bangladesh trade and business roundtable in Dhaka said laboured L/C processing is one of the remaining bottlenecks in Bangladesh's investment climate (DC World News, 10 March 2021).

"Bangladesh has the most complicated L/C opening conditions - there are terms and conditions unique only to this country," managing director and chief representative of Japanese lender MUFG Bank, Hideaki Kojima said.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.