Trade licence renewal tax to shoot up six times
The tax on trade licence renewal is set to increase six times from next fiscal year, raising concerns of soaring operational costs for small and micro businesses.
For traders in Dhaka and Chattogram city corporations the National Board of Revenue (NBR) has proposed increasing the withholding tax to Tk 3,000 from existing Tk 500.
In other city corporations, the tax would be increased to Tk 2,000 from Tk 300.
For traders at municipality in district headquarters, the tax would be Tk 1,000. An increase in tax rate for other municipalities has also been recommended in the Finance Bill 2019 placed by the NBR before the parliament on June 13.
Many small entrepreneurs do not want to get trade licence fearing hassle, said Mamunur Rahman, founder of Ella Pad, a low-cost sanitary pad-maker.
The increase in tax on renewal of trade licence will be a further discouragement for them.
Citing the National Economic Census 2013 by the Bangladesh Bureau of Statistics, he said there were about 8 million active economic units in the country and less than 35 percent of them have trade licences.
On paper, the fee for a trade licence under Dhaka North City Corporation is Tk 3,000. But in reality, an individual has to cough up Tk 8,000-Tk 10,000 for a licence or renewal as there are informal payments to be made.
“A hike in the renewal tax will be costly for small businesses.”
Small-scale women entrepreneurs are especially struggling to get licences as they do not usually own properties in their name.
“The proposed tax increase will make things harder for them,” Rahman added.
Introduced in 2007, the NBR first raised the tax on trade licence renewal in 2012. This will be the second time that the tax administration is seeking a hike.
The tax has been increased based on recommendations from some trade bodies with a view to discouraging seasonal traders, said an official of the NBR.
“We have been told that there are people who get licences to run business for a short time and pack their bags and leave without any notice,” he said, adding that there would be no impact on traders as the tax is adjustable to the total tax payable.
If anyone makes a net profit of Tk 250,000 in Dhaka city, he/she will be have to pay Tk 5,000 in tax. The individual will pay Tk 3,000 in advance and the rest at the end of a year.
“Any additional tax to be paid is refundable,” the tax official said.
Yet, Imran Ahmed, vice-president of the Dhaka Chamber of Commerce and Industry (DCCI), said the measure would drive up the cost of businesses.
“Obviously, this will not yield any good result for us. Our cost is rising in other areas too, but our profit margin is not increasing.”
Some 70 percent the DCCI members are small and medium enterprises and the majority of them do business based on trade licences, he added.
“The NBR could have increased the tax gradually instead of raising it sharply in one go,” said Abul Hashem, vice-president of the Bangladesh Sugar Merchants Association.
