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Management consultants demand VAT cuts

Star Business Report
Management consultants yesterday called for a cut in value added tax imposed on their services, in the upcoming budget, as they earn foreign currency like exporters.
"We are earning foreign currency. Consultancy is a form of exports. So, the government should provide some incentives for us," said M Zakir Hossain, president of Institute of Management Consultants Bangladesh (IMCB).
"The tax and VAT on the consultancy services should be waived," he said at a media briefing at The Daily Star Centre in Dhaka.
IMCB, the only national platform of management consultants and development experts in Bangladesh, organised the briefing on the occasion of International Consultants Day, which was observed yesterday.
The National Board of Revenue imposed a 15 percent VAT on consultancy services in fiscal 2012-13,
increasing it from 4.5 percent earlier.
Nazrul Islam, managing director of Infrastructure Investment Facilitation Company (IIFC), provided an example where an agree-
ment between the IIFC and Young Consultants, where the work orders were outsourced, fell apart as VAT has applied on all the orders.
AK Chowdhury, senior manag-ing partner of Hoda Vasi
Chowdhury & Co, said the VAT on consultancy' services was perhaps increased from a misconception that revenue collection would increase tremendously. Hossain of IMCB also called for formulating laws on the consultancy profession. He opposed the involvement of foreign consultants in areas where local expertise is aplenty.
"We need foreign experts and consultants in areas where we don't have expertise. But there are many areas where our local experts are capable of providing the service."
Chowdhury of Hoda Vasi alleged that in addition to the 2,000 foreigners working formally in the country as consultants, there are another 20,000 foreign experts working without permission, thus draining a lot of foreign currency.
To mark the day, the IMGB also organised a seminar styled 'Infrastructure Development in Bangladesh: Future Prospects and Challenges' where speakers called for public private partnerships in order to meet the country's growing infrastructure requirements.
"Infrastructure is an area where the government has a monopoly. But we can't develop our infrastructure with only public finance," said Islam of IIFC.
Bangladesh will have to between $7.4 billion and $10 billion a year until 2020 to bring its power grids, roads and water supplies up to the mark to serve its growing population, according to a recent study of the International Finance Corporation.
The country has opened up its power and telecom sectors for outside investors, but Islam said the government would have to identify sectors where PPP can fit and contribute to development of the wobbly infrastructure.
AKM Abdullah, financial sector development specialist of the World Bank in Dhaka, highlighted the role of management consultants in project development. Inefficiency in project management is a major problem in the country, he added.
The Bangladesh Investment Climate Fund, which is managed by IFC, is sitting on a fund of $375 million, he said. "But we have been able to disburse only $120 million in the last three years."
Syed AH Liddin, chief executive of the PPP office under the Prime Minister Office, explained the delay in visible progress in the PPP projects launched by the government in the last few years.
There is undue delay in hiring advisors for the projects, as the PPP office needs to follow the procurement rules properly, he said.
"PPP is not the easiest thing to do, as many stakeholders are involved. We have to think and plan ahead to make it work."
The PPP office is now managing 39 projects, which will cost $ 10 billion.