The Foreign Investors Chamber of Commerce and Industry (FICCI) has given a mixed reaction to the national budget for FY2025- 26.

In a statement, FICCI highlighted the budget`s commitment to easing burdens on specific sectors and promoting a predictable tax system. The reduction of the source tax for construction companies and essential goods is a pragmatic move that will offer good relief to these vital industries.

The chamber also lauded the decision not to tax dividends received from a Joint Venture by a JV partner, preventing double taxation. Furthermore, FICCI commended the alignment with international best practices by ensuring the Double Taxation Avoidance Agreement takes precedence over the Income Tax Act 2023.

Other positive aspects noted by FICCI include the simplification of advance tax for commercial importers (though acknowledging potential cost escalation for low value addition), the extension of the rebate and refund period from four to six months for businesses, and the digitization of sales and purchase records through ERP systems, eliminating the need for hard copies.

Amendments to the Customs Act, 2023, aimed at modernization, tariff restructuring, and reduced penalties for violations, were also welcomed as steps towards simplifying import processes. The proposed allocation of Tk5,040 crore for the Public-Private Partnership (PPP) fund in FY2025-26 was seen as a supportive measure for increasing foreign investment.

However, FICCI raised several contentious points. A major concern is the imposition of an additional 7.5 percent corporate tax on publicly traded companies with less than 10 percent of their shares issued through an Initial Public Offering (IPO), deeming its impact "discriminatory."

Equally troubling, according to FICCI, is the withdrawal of the reduced tax rate previously available for companies’ conducting transactions through banking channels. This is a counter-productive measure to the nation`s efforts to establish a cashless society and places Bangladesh at a disadvantage compared to economies like Vietnam and Indonesia, the chamber asserted.

The chamber also expressed apprehension regarding salaried taxpayers, stating that while the increase in the tax-exempt income threshold at the entry level is positive, the "overall changes introduced in the tax structure are likely to impose an additional burden on middle-income earners when viewed in totality."

A significant increase in VAT on online sales, from 5 percent to 15 percent, was also flagged as a measure that will make it difficult for the online business industry to survive and will make it even harder to expand business further, said FICCI.