Sherpa Hossainy's Blog

Income tax — not so knotty now

Posted in Bangladesh, Business, Dhaka, Economy by Sherpa Hossainy on September 21, 2011

Published in The Independent on 21 September 2011

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Some might wonder, as they go past the main entrance, if they have coincidentally bumped into a carnival full of colourful banners and balloons – only with a whiff of serious ambiance.

While income tax remains an un-amusing and inextricable subject, the Income Tax Fair 2011, organised by the National Board of Revenue (NBR), has surely turned the table around.

“It is so remarkable to see people paying tax in a festive mood,” said Shaon Chowdhury, deputy commissioner of taxes of NBR, who was supervising the media centre in the fair.

He said that people from all walks of life responded so spontaneously — which was evident from  eagerness of everyone, as they filled up forms, photocopied or checked documents; but without any ruckus.

People filling up Tax Identification Number (TIN) forms in Income Tax Fair 2011 in Dhaka

The NBR has launched on Saturday, for the second time, the six-day Income Tax Fair in seven divisional headquarters in Bangladesh aiming to create awareness about tax payment and boost revenue collection.

The fair in Dhaka is being held at the Officers’ Club and open for visitors from 10am to 6pm everyday till Thursday.

Last year, the tax authorities organised the fair only in Dhaka and Chittagong. Following the huge response, this year the fair is being held in all the divisional cities.

The gusto continued as thousands of prospective taxpayers kept receiving Tax Identification Number (TIN) instantly and submitted their income tax returns without any pestering.

According to NBR statistics, in the first four days, Tk 29.15 crore was collected as income tax from the fair in Dhaka, while 13,387 tax returns were submitted. A total of 2,442 TINs were also issued in the venue.

The taxpayers, in seven divisional headquarters, have deposited Tk 53.81 crore until Monday. They submitted 26,052 income tax returns while 4,608 TINs were given.

Last year, some 52,440 tax returns were submitted during the fair, as the NBR collected Tk 113 crore in income tax.

The tax administrator expects to have 100,000 visitors and log Tk 300 crore this time, while only 9 lakh, out of 26 lakh TIN holders, pay tax.

NBR officials said they were expecting the number of visitors and collection of income tax to rise in the last few days of the fair. “Day by day the number of people attending the fair is increasing, and I hope the number will continue to go up till the last day,” Chowdhury said.

At the fair, the tax administrator offers a range of services including issuance of TINs on the spot and helping taxpayers fill in tax return forms and pay taxes. The deadline for submission of income tax return for fiscal year 2010-2011 is September 30.

Shahriar Kabir, a medical officer from Manikganj, was paying tax for the first time as he started his job earlier this year.“The service is very good, but there are so many people here. I think some more booths would’ve been helpful,” Kabir added.

As Kabir happily received the required information on getting a TIN from the help desk, he said, “As far as I can understand, I earn money, so I have to pay tax. This is a moral obligation of every citizen.”

Owing to the complication of fiscal and tax laws people often didn’t have proper explanation regarding tax rules and regulations, and unscrupulous taxmen took advantage creating a smokescreen for extortion.

“The income tax is complicated. Sometimes university graduates don’t understand this matter,” said Md Sulaiman, a lawyer who attended the fair to pay his income tax.

A tax official giving instructions to a tax payee

A NBR official in the fair said: “The first class officers couldn’t interact with people directly and that led people to get harassed by the lower-level officers. It’s not likely that tax payers would be harassed by a BCS officer.”

Due to lack of knowledge people didn’t show that much interest to learn all the rules and pay tax but now the awareness has gone up, he claimed.

“This is a one-stop service,” Chowdhury said.

“People now understand that if they pay tax, it is them who will become the beneficiaries. When you pay tax you contribute for your country,” he added.

Businesspeople, such as Raihan Uddin, who opened a new company and came here to get a TIN certificate, are also gathering up in the fair.

“The service is very good. If it is organised every year, it will be very helpful for the businesspersons,” he said.

Although, the flurry of people had made some to wait longer — as Md Abdul Matin, a hardware businessperson, complained, “There are too many people, I’ve been sitting here for 20 minutes. I think they need more booths and manpower.”

But they are doing a great job in providing quick and efficient service to people, he admitted.

Last week, the finance minister said the government is determined to make income tax the biggest source of revenue in the next five years.

He claimed that the government is set to collect double revenue this fiscal.

The positive proceedings in the Income Tax Fair could easily make this a reality.

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Solar Cold Storage – a new horizon for farmers

Posted in Bangladesh, Business, Energy and power, Interviews, Renewable energy, Technology by Sherpa Hossainy on September 14, 2011

Published in The Independent on 9 September 2011

Read the article on Independent website
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Farmers in Bangladesh might finally get free from the clutches of hoarders and middlemen, thanks to a novel green technology — solar cold storage.

The impoverished farmers are most often denied fair prices during harvesting season as they are forced to sell off their produce to unscrupulous middlemen, who stockpile and sell those at much higher prices later.

Bangladesh Clean Technology Company Ltd (BCTCL) is going to introduce new solar-based micro cold storages in Bangladesh at affordable prices in a bid to give the farmers a chance to store their produce and save themselves from the menacing grip of hoarders.

“The opportunists take advantage of farmers’ inability to store their produce. So they count big losses and sell their produce at a much lower price to the cold storage owners,” said Iqbal Sufi, managing director of BCTCL.

The hoarders usually store the produce for a few months and sell it later at four to five times higher prices. The farmers and customers get extorted and exploited in the process, Sufi added.

“Instead of the traditional cold storages that are used to store potatoes, we are going to introduce micro cold storages. Such cold storages can be used to store any kinds of vegetable, fruit and other agro-products,” said Sufi.

A traditional 1,000-tonne cold storage costs about Tk 3.5 crore ($473,970) and consumes a large amount of electricity. They are rarely used to store any other agro-products except for potatoes in Bangladesh.

Micro cold storages are usually 100-500 tonnes in size and run solely by solar power. It has a backup generator, which is only used initially to achieve the standard cooling temperature.

A 100-tonne capacity micro cold storage costs around Tk 35 lakh ($47,400) and there is little or no electricity cost incurred.

Infrastructure Development Company Ltd (IDCOL) has expressed interest to finance the project with assistance from the World Bank’s renewable energy development funds. BCTCL will submit the project proposal to IDCOL within a week and Sufi expects to start the project one or two months after the official paperwork is done.

The company is planning to introduce four 500-tonne capacity cold storages in Rangpur, Jessore, Munshiganj and Savar in the first phase and also aims to introduce those all over Bangladesh, even in Hatia island where it can be used to store dried fishes.

The World Bank will provide 50 per cent subsidy to the poor farmers who will buy the micro cold storages directly. Thirty per cent of the money will be given as loan at six per cent interest rates, which has to be paid back within six years. The rest 20 per cent, which is around Tk 3-4 lakh, has to be paid at the beginning.

Sufi said there are many farmers who can afford to pay the first down payment. “There are plenty of people who live abroad and upon coming back to Bangladesh invest their hard-earned money in risky ventures without thinking it through.

“They can invest their money to buy this cold storage and store their produces. Also, they can rent out space in such solar-run storage to the farmers who want to store their produces,” he said.

The micro solar cold storages can be used all year round unlike the traditional ones, which are only operational 8-9 months and used as one-time solution.

Sufi said: “If someone keeps a sack of potato for a whole season he can get Tk 300 as rent; whereas using micro solar cold storage you can store dry chillies, which are becoming increasingly popular as a all-year-round produce, and get Tk 500.”

The power consumption to store dry chillies is almost one third of potato and it is more profitable to store them than potato, he added. In these multi-purpose cold storages farmers can also opt for storing imported vegetables and hybrid seeds, and they can store four different types of produce at the same time.

“We have done the practical research and feasibility study and it is obviously much more profitable than the traditional potato cold storages,” Sufi said. A farmer can get back his investments within three to four years, he pointed out.

Unlike typical cold storages, which sprang up all around Bangladesh, solar cold storages are significantly energy-efficient and have modern designs.

“The existing structures of the cold storages are at least a hundred years old. You will not see this technology anywhere in the world nowadays,” said the BCTCL boss.

The ammonia-based traditional cold storages are only suitable for potatoes only, as other produces are affected by the leaked ammonia inside the storage.

Sufi said there is a need to get out of the trend of building potato cold storages, and put attention towards other agro-products such as tomato and chilli.

“The climate of this country makes vegetables and other produces quickly perishable. You either have to eat them or sell them at low prices within two days,” he said.

Sufi believes now it is the time to build the infrastructure to save the farmers and ensure fair prices for their products.

“The farmers won’t be able to hold on to their produces if they don’t have storages of their own. We are introducing the technology keeping this in mind,” he said.

Modernisation of tax payment

Posted in Bangladesh, Business, Dhaka, Economy, Finance by Sherpa Hossainy on September 14, 2011

Published in The Independent on 7 September 2011

Read the article on Independent website
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Digitisation of the country’s tax collection system is now under process for a better revenue income for the government.

International donors are expected to hold a meeting next week with the National Board of Revenue (NBR) on financing modernisation of the system.

Asian Development Bank (ADB), International Finance Corporation (IFC) and International Monetary Fund (IMF) delegates are likely to discuss supporting NBR for its automation project on September 11.

“We will seek financial and technical support from the donors in the meeting for the modernisation process of NBR,” Nasiruddin Ahmed, chairman of NBR, told The Independent on Tuesday.

The modernisation plan includes online tax payment system and tax return submission, arranging intra-organisational connectivity and building up a well-organised tax collection system.

The revenue collection authority will also use these funds to provide training for NBR officials and develop the backbone for the online system, Ahmed said.

Executive Committee on National Economic Council (Ecnec) on August 2 approved the NBR Automation Project across the country that aims at bringing one crore people under tax net within the next three years.

The Ecnec also approved the online tax return filing and digitalised taxpayers’ information service centre project last week.

Some income tax offices, including the Large Taxpayers Unit (LTU), have already introduced the online tax return submission system, while the NBR plans completion of  its online tax return filing and submission process by 2013.

According to the project working paper of NBR, Bangladesh has the lowest ratio of direct tax and GDP in the sub-continent — only 2 per cent. The tax-GDP ratio in India is 6 per cent and in Pakistan 4 per cent.

“We hope to get support from the donors to implement our five-year modernisation plan that would raise the tax-GDP ratio to 13 per cent by 2016,” Ahmed said.

Another NBR study also revealed that there are one crore capable tax payers in Bangladesh but only 10 lakh submit their tax returns on a regular basis. Currently, the number of Tax Identification Number (TIN) holders is around 32 lakh.

The NBR would need around Tk 700 crore for its automation and streamlining the tax administration, NBR sources said.

The tax administration received an urgent fund of Tk 61 lakh from the finance ministry early last month to develop a training institute for the customs officials.

The NBR chairman also hoped for continued support from the finance ministry in this regard.

Beach house export prospect bright

Posted in Bangladesh, Business, Export and Import, Interviews by Sherpa Hossainy on September 4, 2011

Published in The Independent on 4 September 2011

Read the article on Independent website

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“Sometimes I find it hard to believe that I export such an unusual product,” said Anowarul Islam, managing director of Pioneer Group, as he explained export prospects of an unconventional product — beach house.

As the name suggests, beach houses are small huts placed by beaches, used for refreshment, taking foods and changing by the beach-goers as they enjoy the sun-bathing.

Islam told The Independent that earlier he was reluctant to share the concept with anyone because there are some “idea-thieves” in Bangladesh. “Now we are an established company and I feel there is a need to share,” he added.

Raw material for beach house (hay)

The lone exporter of beach houses, Pioneer Overseas Corporation (POC), a sister concern of Pioneer Group, started exporting beach houses in 2006 on a trial basis after a Bulgarian company expressed interest to buy the exceptional product.

Islam said POC, established in 1982, was mainly involved in exporting kite-parts made of bamboo, mainly to Pakistan. Through one of his Pakistani clients he met a Bulgaria-based company Baron Ltd representative, who was impressed by the motifs of the old-style small village huts made of bamboo and hay — known as “Kachari Ghor” in Bangladesh.

Raw material for beach house (hay)

“The Bulgarian buyer said there is a big demand for such houses in Europe and wanted us to make something similar,” Islam said. It was so successful and profitable that the company never looked back.

The raw materials of beach houses are primarily bamboo poles and sticks, paddy straw and hay. “The raw materials are purely natural and local; we don’t use any imported item,” said Islam.

So far POC has exported 400 such houses, which are usually 10’X10’ in size, mainly to Bulgaria, Croatia and Pakistan. The total export volume of POC now stands at $450,000.

“Last year we made 75 shipments, and this year 37 shipments are completed and 100 more are in the pipeline,” he said. Manufacturing cost of one beach house is around $1,500-2,000, depending on the intricacy of design.

The house parts like roof, bamboo poles and walls are shipped usually in 40′ containers and get assembled abroad.

As the world now shifts to using more eco-friendly products, demand for bamboo-made beach houses are surging exponentially. “Beach houses have a high demand in sea-side hotels and resorts in Europe nowadays,” he said.

Islam said that big orders for temples — a collection of beach houses which can accommodate 100 to 150 people as opposed to 10’X10’ beach houses which are for couples — are coming in but material and manpower shortage poses a big problem. “It’s a big project, we have orders, but we can’t take them as this will require more money, manpower, complex designs and raw materials,” he said.

Currently POC is working with a workforce of 500 craft persons, but the figure was only 20 when it started. “Mostly indigenous people are employed by us as they are really adroit at this,” Islam said.

Most manufacturing takes place in Rangamati, Kaptai, Chittagong and Sunamganj where good quality raw materials are available, he added.

As demand rises, the beach house manufacturing might face a raw material crunch as production of quality bamboo is few and far between. “We need 1,000,000 bamboos every year, and we are trying to lease 100 to 150 hills in Rangamati to cultivate bamboos,” Islam said.

POC only could get lease of six hills as the government seems unenthusiastic about POC’s venture and more interested to lease the hills for cultivation of rubber, a much-vaunted export item.

Islam said: “We are the only one with an application. No one really knows much about it and does not appreciate what we are doing.  “If we can produce quality bamboo in our own hills, our costs will come down and we can take more orders.”

Roof of a beach house

Naming India, Indonesia and Vietnam as the biggest market players globally, Islam said there is a need to use improved tools to accelerate the manufacturing process.

“One labourer can only cut 120 pieces of bamboos a day using manual tools, whereas in a foreign country 1,000 can be cut because of availability of superior tools,” he said.

Anowarul Islam sought government incentives and effective policies to boost the production of bamboos to have adequate supply of raw materials. Recently the commerce minister said the government will declare handicrafts as a thrust sector and exempt it from all existing value added tax to boost its exports.

The global handicrafts market is $120 billion and the present export volume of handicrafts from Bangladesh is merely $4.47 million.

“We have spoken to the chairman of National Board of Revenue, the Environment Ministry and the International Business Forum of Bangladesh for support and we hope this new product will catch the high-ups’ attention,” Islam said.

The beach house export also involves other handicrafts item as they are used to decorate those houses.

“It’s not that only beach houses are exported; there are many decorative items needed for the house like flower vase and wall mat, which are also exported.

“Now we are also providing Nakshikatha to add aesthetic value to the beach houses; so beach house exports will also help other handicraft items’ export to grow,” Islam added.

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