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TECHFOCUS

'Budget not favourable for the Software business'

SAAD HAMMADI
THE government has imposed a 10 percent corporate income tax on software businesses in the proposed budget for 2005-06 fiscal year, an inconsiderate step against the thriving sector.
The proposed tax may in time prove expensive for the industry since the government's loss in revenue income from local market is raising increasing, thanks to the multinationals' rulein the market and a risein import.
Against the backdrop of this scene, Bangladesh Association of Software and Information Services
(Basis) organised a post-budget discussion at their office at the ICT Incubator on June 11.
Multinational companies are contributing to development of the ICT sector in the country. But it must as well be known how the country maybe affected in terms of national revenue if local companies are not promoted.
The privately-run companies in the software industry do not get government incentive. The current value of the software market is about Tk 250 crore, of which 50 percent to 60 percent come from local entrepreneurs.
More recently, the Basis observed that the software market
has witnessed 122 percent export growth in thelast six months.
Software exported brings 100 percent value addition, whereas readymade garments (RMG) may find only 15 to 20 percent ofit.
This means while RMG export requires import of raw materials, software export earns its complete value for the product because it does not need any such import.
"Export is not the success parameter, our concern is the contribution of local software in domestic market, which may reduce for the tax imposition." said Basis Director Fahim Mashroor.
ICT being one of the major booming sectors as proclaimed by the government includes preshipment inspection (PSI) on computers and computer related peripherals despite being considered as one of the tax exempted items, whereas under statutory regulatory order (SRO) No. 171, items under tax holiday are also freed from PSI.
Existing pay scale in software or overall ICT industry has failed to attract a good number of local graduates. Moreover, the imposition of the 10 percent corporate income tax will worsen the situation. This may further push local talents towards foreign market to sell their expertise.
In comparison to any other sector, the proposed allocation for ICT has been very limited, although the sector could have given a better return if the government had been more supportive ofit.
The Basis had recommended for
a two-percent allocation in the annual development programme, which is yet to be finalised. Software and IT industries seek government support at initial stage, but Finance Minister M Saifur Rahman in his budget proposal simply ignored the sector's importance.
The Basis had urged the government to reconsider its budget proposal and exempt the corporate income tax until the 2010 FY. Tej tax imposition at the initial stage will even deteriorate the current software position in the local market.
In its reaction to the proposed budget, the Basis said typical payback period from investment in any software project is more than five years.
Basis President Sarwar Alam urged the government not to repeat the mistake they made in 1991 by refusing the submarine cable.
"It's an industry, which develops with development of the knowledge base, which is crucial and requires time," he added.
A Towhid, chairman of IBCS-Primax and founder president of Basis, Forkan bin Quasem, secretary general of Basis, AKM Fahim Mashroor, CEO of Bdjobs and director of Basis, Zahidul Hasan Mitul, director of Basis, Abdullah H Kafi, former president of BCS and managing director of JAN Associates, SM Iqbal, president of BCS, and SM Kamal, former president of BCS and Basis, among others, attended the discussion.