Revenue Board Expects ‘Type-II’ Parenting of Tech Startups
If the corporate tax exemption facility of the software and ITES sector is lifted After June, the developing local young entrepreneurs of the country’s technology sector will face a huge problem. Their request is that, the flourishing ‘startup’ sector should not be ‘shut-up’ for focusing on revenue collection alone. According to their assessment, this initiative can choke the dwindling reserves in the country. Therefore, tax assessment in the revenue sector, leaving out of ideas in the case of vacations, data-based decision-making is advised to those concerned in the sector.
Investors and entrepreneurs in this sector say that startup sandbox has been launched for two years but no company has yet been registered under it. As a result, they will have to pay tax at the rate of 0.6 percent of their total income in the future whether they make a profit or not. This is very alarming and worrying. In this reality, VC funding in the country has decreased by 42 percent between 2022 and 2023. However, due to tax exemption, new initiatives are being developed in neighboring countries like India, Singapore and Egypt. Therefore, the businessmen of this sector have demanded tax holiday benefits for at least 5 years for every startup in the country. At the same time, technology sector organizations are keen to help the Revenue Board in taking the initiative to automate the entire process.
They raised this demand at a meeting held on Wednesday on the tax policy for development of local technology enterprises held at Daily Star Conference Center in Kawran Bazar of the capital.
The round table discussion was jointly organized by Venture Capital and Private Equity Association of Bangladesh (VCPEAB), Bangladesh Association of Software and Information Services (BASIS), Institute of Informatics and Development (IID) and EdTech Society.
Moderated by Edtech Society Coordinator Faheem Mashroor, VCPEAB President Shamim Ahsan, BASIS Senior President Samira Zuberi Himika, IID Executive Chief Saeed Ahmed, AR Communication Founder CEO M Asif Rahman, Bids Economy Limited Managing Director Zeeshan Kingshook Haque, Chaldal.com Founder Zia Ashraf, Content Matters Ltd. CEO SM Rafiqul Islam Sana, Dreamers Lab Founder Tanvir Hossain Khan, SSD Tech Founder Feroze Md. Zahidur Rahman, Bangladesh Venture Capital Limited CEO Shaukat Hossain participated in the meeting.
Fahim Masroor, the former president of BASIS, the main organizer of the program, said that according to the calculations of the National Board of Revenue, the government is losing about Tk 1,470 crore in revenue every year due to tax exemptions in the ICT sector. As such, companies in this sector are making a profit of 5 billion taka annually. He said that this calculation does not reflect the real picture in any way. At present, more than 5000 small entrepreneurs of software and information technology services make a maximum profit of Tk 1 billion annually, out of which the government will get a maximum of Tk 300 crore if tax exemption benefits are withdrawn. He urged the Board of Revenue to conduct a company-level survey to determine the true profitability of the sector.
Shamim Ahsan, the former president of BASIS, said that the benefits of the policy support that the government is already providing to the IT sector have just started to come. He said no one in the sector wants the tax exemption to remain indefinitely. However, if it is withdrawn now, the government will lose more taxes in the next five to ten years than the small additional tax that it will get in the very short term. Also, many entrepreneurs will leave the country to start business abroad, which will cause the biggest loss to new job creation.
Speakers felt that the policing trend of the Board of Revenue was devolved to associations and emphasis was placed on knowledge sharing with assesses, circle managers and revenue collectors. Investment Advisers on policy and revenue sectors, need to be in close contact with Prime Minister’s advisory channel. 9 billion taka is paid annually as salary alone from ICT companies in the country. Government gets tax from here too. There is a bad debt of Tk 72 billion in the country, giving Tk 2 billion discount for this sector is a big deal. All in all, they hope that the Revenue Board will take the successful ones out of the ‘wash their feet and drink water’ type of parenting to develop them in the ‘Shishu Academy competition’.