The Foreign Investors’ Chamber of Commerce & Industry (Ficci), the apex trade body of foreign investors in Bangladesh, has called for comprehensive tax reforms to create a more conducive and competitive tax environment for private and foreign direct investment (FDI) in the country. Ficci believes that FDI is critical for Bangladesh to achieve its goal of becoming a developed economy by 2041, and elevating living standards and strengthening tax revenue collection will be essential.
The publication “Catalysing Greater FDI for Vision 2041: Priorities for Building a Conducive Tax System in Bangladesh” highlighted several factors that hinder FDI in Bangladesh, collectively diminishing its appeal as an investment destination. Factors include trade, logistics, infrastructure, investment policy, business regulations, and a lack of depth in the financial sector and tax environment.
Ficci said that Bangladesh’s tax system has major gaps when compared to international tax principles, including neutrality, effectiveness, fairness, efficiency, flexibility, certainty, and simplicity. It also noted that unconducive policies, unclear processes, complicated and contradictory regulations, tax disputes and legal hassles, lack of predictability and effectiveness of tax incentives, and hurdles in claiming tax benefits are major challenges.
Ficci said both tax rates and FDI would likely increase if the tax environment was more conducive. It suggested that FDI can reach $6.6 billion by 2025, $20 billion by 2031, and $50 billion by 2041 with effective and prudent taxation reforms. Tax revenue could rise to $227 billion by 2041 if tax reforms are implemented compared to $98 billion without reforms.
Bangladesh’s FDI inflow and Global Value Chain participation have been low compared to its regional peers. Ficci urged the government to undertake comprehensive tax reforms to create a more conducive and competitive tax environment for FDI, including reducing corporate tax rates, rationalizing tax incentives, simplifying tax administration, enhancing the tax dispute resolution mechanism, expanding the tax treaty network, and promoting digitalization and automation in tax processes.