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Dr Khondaker Golam Moazzem on business licensing

Published in The Daily Star on Monday, 24 August 2015.

NBR chief accuses businessmen of misusing bonded warehousing
DCCI’s seminar focuses on rising cost of doing business

Star Business Report

The government can set up two Padma bridges in a year with the customs duty that the National Board of Revenue is losing to the misuse of bonded warehousing by businessmen, the chief tax official said yesterday.

“The NBR can provide the amount to the government if this misuse is stopped,” said Md Nojibur Rahman, chairman of the tax authority. He however did not specify the amount that is being lost a year.

The Bridges Division recently revised the estimated cost of the much-hyped Padma Bridge project at around Tk 28,000 crore.

The NBR chief alleged that the products that should be in the bonded warehouses go directly to Islampur, a wholesale market. “How does that happen?”

Bonded warehousing is a government-provided service that allows merchants to bring and store their dutiable raw materials without payment of duty within the sovereign nation’s land with the right to re-export them.

Bangladesh imports goods worth $8 billion a year from China, but according to Chinese authorities, they export products worth $12 billion to Bangladesh, he said. “Where does $4 billion go?” he asked, pointing at the informal trade between the two countries.

Rahman was addressing a seminar on ‘increasing the cost of doing business’, organised by Dhaka Chamber of Commerce and Industry (DCCI) at its auditorium yesterday.

Abul Kalam Azad, principal secretary to the Prime Minister’s Office, said law and order is a major factor in doing business.

“Though there were no political issues, the country observed violence during January-March that hampered business,” he said.

Although he is in favour of a single-digit rate of interest, he said the rate has been reduced much from the 18-20 percent level and the business community should acknowledge that.

In response to demands for adjusting the fuel price, he said business people talk only about one component. “It is true that the domestic fuel price is higher than the international price. What about gas prices? It would be four times higher if we adjust that.”

On the increased licensing fee, he requested the businessmen to compare it to their total cost of business. “The licensing fees have been increased, but what percentage is it of your total expenditure?”

Earlier, speakers at the discussion urged the government to rationalise the licensing and renewal fees that the government increased through a gazette this year. The hike is raising their cost of doing business.

DCCI President Hossain Khaled said the increasing cost of doing business has emerged as a significant threat not only for the new entrepreneurs but also for the established businesses.

“A new entrant, who would like to start a business in export, import, indenting and supply has to pay Tk 1.3 lakh as licensing fees to different government agencies, even if the enterprise incurs a loss at the end of the year.”

It is forcing entrepreneurs to pull out of their business at the early stage, he added.

“I urge the government to rationalise the cost of doing business in Bangladesh with an easy, low cost business licensing regime, a single-digit cost of credit facility, and most importantly, ensure an uninterrupted power and energy supply.”

Presenting a keynote, DCCI Vice-President Shoaib Choudhury referred to a case study that showed that the trade licence fee will increase between 56.52 percent and 484 percent in various sectors due to the revised gazette notification.

There is also a 15 percent VAT on the trade licence fee, he said, recommending re-fixing the fee and withdrawing the VAT.

The minimum individual income tax should be re-fixed at Tk 3,000, he said. “The tax net should be widened, rather than imposing pressure on existing tax payers.”

Recommending cuts in the interest rate on business loans to a single-digit, Choudhury said the government should adjust the domestic fuel prices to global trends.

KG Moazzem, additional research director of Centre for Policy Dialogue, said as the licensing fee is a fixed cost, it should be determined whether it has a high or low impact on the per unit cost of production.

However, the new licensing fee is quite high and it should be rationalised, he added.

“The city corporation should look at new business areas to increase its revenue collection, instead of raising the fee.”

The spread between the deposit and lending rates has remained at 5 percent for the past decade. “But during that time, banks’ efficiency has increased so much.”

The spread can come down to between 2 and 3 percent that may result in a cut in the lending rate, he said. Unless infrastructure is improved, private sector investment cannot be increased, and GDP growth would not be at 7 percent rate, Moazzem added.

“Without a business friendly environment, entrepreneurs will not come forward to invest,” he said, adding that the government should continue its effort to get back the GSP facility from the US.

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