Apparently desperate to make its plan to implement mega projects under public-private financing successful for fastening development process, the government is going to offer a number of new incentives to attract more investment in Public Private Partnership (PPP) projects.
Following repeated failure in bringing a breakthrough in the development process, the government now has taken a fresh move to make its earlier planned PPP concept popular and attractive to prospective investors, both at home and abroad.
Around Tk 4,000 crore of PPP fund formed by the government still stands idle for last three to four years due to poor response from local as well as foreign investors, which top entrepreneurs blame for lack of proper policy, weak infrastructure as well as political instability.
To improve the situation, the Prime Minister’s Office (PMO) has already prepared a draft PPP concept incorporating numerous facilities for probable investors which include withdrawal of long term VAT and customs duties.
The draft has already been sent to different ministries and divisions and sought opinion in this regard, an official confirmed.
As per the draft, the government may fully waive corporate income tax for PPP investors for 10 years from commencement of commercial operation of the project or half of the contract period, whichever is greater.
This will enable successful delivery of PPP projects and therefore will help generate additional revenue from income tax for the remaining term of the contract under fiscal policy, the PMO proposal suggests. As per the present policy, the newly established physical infrastructure facility, set up between July 2011 and June 2019, would enjoy 100 percent tax waiver in the first and the second year which will come down to 80 percent in the third year. The tax exemption would decline by 10 percent in every year and would continue till 10th year of the investment.
Besides, the PPP projects would also get full exemption from capital gains on tax arising out of shares in PPP companies by any shareholder, the draft said. In present provision, the PPP are allowed 15 percent tax exemption on the entire income. The draft also allows full income tax exemption on interest income of foreign lenders from PPP projects in Bangladesh. PMO justification of the provision said this is necessary to encourage foreign investment which is critical to enable government meet billions of dollars of infrastructure investment requirements.
Additionally, this provision will allow access to funding at low interest rates enhancing project viability and reducing project delivery cost.
Major power projects like Rampal coal-fired power project is now facing trouble in financing as lender sought over six percent interest rate.
In present policy under PPP projects, the interest earned by foreign lenders on their loans is taxable. Income tax for up to three years for expatriate personnel employed under PPP projects will also be fully exempted.
Now, it allows 30 percent income tax for any non-resident in Bangladesh under the projects.
Under the draft, full tax exemption will be provided on preferred share dividend also.
Rate of tax applicable to banks, insurance companies and other financial institutions other than merchant banks should be 27.5 percent instead of 42.5 percent on their return.
Full tax exemption on royalties, technical know-how and technical assistance fees for PPP projects and provision of facilities for their repatriation will also be recommended, the draft said.
Full exemption of VAT on raw materials, plants, equipment, spare parts, bills/fees of design and construction companies and fees for other professionals, financial and legal services has also been suggested. Besides, full waiver of customs duties, import permit fees and other surcharges on raw materials, capital machineries and spare parts for use of PPP projects was also suggested under the draft. Presently, it allows two percent duties. Full stamp duties waiver under local regulations has also been suggested.
The government is cordially asking local and foreign investors to come forward and make investment under PPP projects but response from investors is very poor, State Minister for Finance and Planning M A Mannan said while talking to daily sun early this month.
-the Daily Observer
