FE Report (January 22, 2011)
The government is likely to continue tax holiday facility for some new industries even after 2012 in line with the recommendations of an expert panel.
The panel recommended for continuation of the facility to help the industries concerned stay competitive amid global economic slowdown.
The panel on direct tax law has found it impossible to keep the local industry competitive in the international market after abolishing the tax-benefit.
The draft of the Direct Tax Act 2012 has suggested continuation of the tax holiday facility for 16 categories of industry, and withdraw it by phases after five years.
The government earlier said it would not continue the facility after June 30, 2011. But the expert committee has found it essential to encourage investment.
"New industries have to be set up following some specific rules to enjoy tax holiday," said NBR member Aminur Rahman, who heads the tax policy wing.
New manufacturing Indus tries will enjoy full tax-exemption during the first two years of their commercial operation. For the third and fourth years, they will pay 50 per cent or half of the total payable income tax.
They will pay 75 per cent of the actual payable tax in the fifth year, and from the sixth year normal rate of income tax - 37.5 per cent - will be applicable, he added.
Nearly 16 investment-intensive sectors will enjoy tax holiday, according to the proposed draft law. The facility will be gradually withdrawn from some sectors after becoming self-reliant, officials said.
The government had withdrawn tax exemption facilities from 11 sectors in 2004, from seven sectors in 2005, and from five sectors in 2006.
New units producing textile, textile machinery, jute goods, high-value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, MS-rod, CI-sheet, fertiliser, insecticide and pesticide, computer hardware, petro-chemicals, agriculture machinery, boiler, compressor, energy saving bulb, solar energy panel, barrier contraceptive or rubber latex, basic raw materials of drugs, chemicals and pharmaceuticals will be entitled to enjoy the tax holiday facility.
The draft law will be amended further in line with the suggestions of stakeholders, taxpayers and experts before getting final nod in the parliament, said a member of the expert panel.
"The proposed draft is not yet in a complete shape. Incomplete version of the draft has been hastily made available in the NBR website for giving enough time to the stakeholders, so that they can provide their valuable contribution," he said.
Few of the policy issues, such as distinguishing investment and speculation in the stock market, taxing dividend income versus capital gain etc, will be streamlined on the basis of the government's economic objectives towards the stock market and opinions from the stock market regulators, market intermediaries and investor representatives, he added.
The panel recommended for continuation of the facility to help the industries concerned stay competitive amid global economic slowdown.
The panel on direct tax law has found it impossible to keep the local industry competitive in the international market after abolishing the tax-benefit.
The draft of the Direct Tax Act 2012 has suggested continuation of the tax holiday facility for 16 categories of industry, and withdraw it by phases after five years.
The government earlier said it would not continue the facility after June 30, 2011. But the expert committee has found it essential to encourage investment.
"New industries have to be set up following some specific rules to enjoy tax holiday," said NBR member Aminur Rahman, who heads the tax policy wing.
New manufacturing Indus tries will enjoy full tax-exemption during the first two years of their commercial operation. For the third and fourth years, they will pay 50 per cent or half of the total payable income tax.
They will pay 75 per cent of the actual payable tax in the fifth year, and from the sixth year normal rate of income tax - 37.5 per cent - will be applicable, he added.
Nearly 16 investment-intensive sectors will enjoy tax holiday, according to the proposed draft law. The facility will be gradually withdrawn from some sectors after becoming self-reliant, officials said.
The government had withdrawn tax exemption facilities from 11 sectors in 2004, from seven sectors in 2005, and from five sectors in 2006.
New units producing textile, textile machinery, jute goods, high-value garments, pharmaceuticals, melamine, plastic products, ceramics, sanitary ware, steel from iron ore, MS-rod, CI-sheet, fertiliser, insecticide and pesticide, computer hardware, petro-chemicals, agriculture machinery, boiler, compressor, energy saving bulb, solar energy panel, barrier contraceptive or rubber latex, basic raw materials of drugs, chemicals and pharmaceuticals will be entitled to enjoy the tax holiday facility.
The draft law will be amended further in line with the suggestions of stakeholders, taxpayers and experts before getting final nod in the parliament, said a member of the expert panel.
"The proposed draft is not yet in a complete shape. Incomplete version of the draft has been hastily made available in the NBR website for giving enough time to the stakeholders, so that they can provide their valuable contribution," he said.
Few of the policy issues, such as distinguishing investment and speculation in the stock market, taxing dividend income versus capital gain etc, will be streamlined on the basis of the government's economic objectives towards the stock market and opinions from the stock market regulators, market intermediaries and investor representatives, he added.
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