Bangladesh Announces Tax Exemptions to Boost Entrepreneurship and Startups

The National Board of Revenue (NBR) of Bangladesh has announced tax exemptions and rebates for investments in specific sectors to encourage entrepreneurship and startups in the country. This move comes as the current tax break for the IT sector is set to expire in June 2024, raising concerns among tech entrepreneurs about the sustainability of their businesses.

Tech entrepreneurs are calling for an extension of the tax exemption until 2041, aligning it with the government's 'Digital Bangladesh' vision. They argue that the tax break generates significant benefits, especially in terms of job creation and investment, without causing massive revenue loss. "If Bangladesh withdraws the tax exemptions, it could lead to a loss of the $1 billion in investment attracted over the past five years and discourage software developers from repatriating their export earnings," warned industry stakeholders.

The NBR has also announced plans to gradually reduce tax support for local industries and others that currently enjoy tax benefits. NBR Chairman Abu Hena Md Rahmatul Muneem stated that it will not be possible to continue these tax supports after 2026, urging industries to build their capacity to operate without the tax benefits. The NBR is facing pressure to increase the tax-GDP ratio and has indicated that it will not be able to provide continuous tax exemptions, particularly for the aviation industry, which has seen sudden closures due to liabilities.

Why this matters: The potential withdrawal of tax exemptions for the software and IT-enabled services sector in Bangladesh could have severe consequences for the tech startup ecosystem and the country's vision of becoming a 'Smart Bangladesh' by 2041. The decision will impact investment, software export revenue, and the survival of many tech startups, making it a crucial issue for the future of Bangladesh's technology industry.

Experts suggest that the NBR's estimates of the profits generated by the IT sector may be inflated and that the actual tax revenue the government could collect from the sector if the exemptions are withdrawn may not be significant. They emphasize the importance of the tech sector for the government's 'Smart Bangladesh' vision and call for the extension of the tax exemption period to support the continued growth and development of the industry. The roundtable highlighted the need for a predictable, long-term, and startup-friendly tax policy environment to attract and retain investments in the tech sector.

Key Takeaways

• NBR announces tax exemptions and rebates to encourage entrepreneurship and startups.
• Tech entrepreneurs call for extending IT sector tax break to 2041 to support 'Digital Bangladesh'.
• NBR plans to gradually reduce tax support for local industries by 2026, citing revenue concerns.
• Withdrawal of IT sector tax exemptions could severely impact investment, exports, and tech startups.
• Experts suggest extending tax exemption period to support tech industry growth and 'Smart Bangladesh' vision.