In spite of alleged abuse or misuse of tax holiday for industries the government may continue to provide this facility for a year or more, reports UNB'

’ While critics brand it as a means to evade other taxes, local industrialists are demanding extension of the scheme that Is expiring on June 30. 2000

The period is likely to be extended. Only the next budget can say how long will be the period." an official of Board of Investment said Wednesday. He. however. hinted the extension may be for one more year. An Industries Ministry official corroborated his statement.

Despite constant pressure from lenders, including World Bank, tax holiday can not be withdrawn overnight as local industrialists want it "as a means of evading other taxes", the official said. Foreign investors also expect it to continue. but they do not bother for it that much because scopes for tax evasion are rare for them.

"In lieu of tax holiday, government prefers accelerated depreciation allowance to help industries as well as check revenue loss." said the official.

Finance Minister Shah A M S Kibria alleged that the tax holiday is being misused. On different occasions last month, he told chamber leaders that the government might consider further extension of the scheme

only after having assurance from the business community that there would be no further abuse of it.

Tax officials also detected abuses of tax holiday by local industrialists. They, however, favoured extension of the scheme for another five or 10 years for selected industries.

The government announced the general tax exemption in early '90s applicable for all industries Initially for five or seven years based on their locations. Industrial units can apply for further extension of the initial period. New Industrial Policy also upholds the special incentive to promote both local and foreign industries.

Initial period of tax holiday for industrial units in Dhaka and Chittagong divisions (excluding three hill districts) is five years while it is seven years for units in Khulna. Sylhet and Raishahl divisions and three hill districts.

Neither the Ministry of Industries nor the Board of Investment has any statistics on. beneficiaries of the special tax exemption.

Even National Board of Revenue (NBR). which is authorised to issue tax holiday certificates to industries, has not carried out any survey to ascertain the revenue loss for tax holiday or assess gain from new industries. which availed themselves of the incentive.

A senior tax official last month frankly alleged the tax holiday for industries is largely being misused as a means of whitening the black money.

He proposed the scheme be extended for another 5 or 10 years in the next budget, but blanket coverage of 100 per cent full tax exemption for all industrial ventures anywhere in the country should be withdrawn.

Rather the scheme should be restricted to some selected areas based on priorities, like that in other countries in the region, member (Taxation) of National Board of Revenue Famq Ahmed Siddiqi told a seminar in the city.

Some selected industries should get 100 per cent tax exemption while other Industries should be sorted out for exemption of various percentages as per priorities.

Tax holiday scheme is very liberal here compared to that in other South Asian countries. Siddiqi said. The incentive in India. Pakistan and .Sri Lanka is extended either to selected priority industries, or to promote Industries in less developed areas.

Siddiqi cited how the blanket tax holiday leaves scopes for legalising black money as one can shift investment from the parent units to expansions and again enjoy the holiday for the expanded unites.