Businesses are passing through a "hard and rocky" situation amid high inflationary pressure due to a rise in the cost of finance, labour and energy, according to senior officials of various firms, especially foreign corporations.

The situation has worsened for an increase in taxes, they said while urging the National Board of Revenue (NBR) not to focus solely on revenue growth by imposing more taxes on compliant taxpayers.

The NBR needs to consider the impact of its decisions on trade and investment, they added.

Their comments came during a dialogue, titled "Policy Alignment to Enhance the Trade and Investment Climate", organised by the American Chamber of Commerce in Bangladesh (AmCham) at The Westin Dhaka.

Since the 1990s, the challenges faced by businesses in the country have remained almost the same, said Forrest E Cookson, an economist and former president of AmCham.

"The complexities remain the same, the problems remain the same…nothing much has changed," he said.

To attract foreign investors -- who are in a wait-and-see approach -- economic and policy stability is necessary, he added.

Bangladesh recently ranked 29th out of 50 countries in the World Bank's Business Ready report, trailing behind Nepal and Indonesia, Cookson said.

This highlights a significant challenge in improving the domestic business environment compared to neighbouring countries, he said.

Local businesses are in a truly challenging situation as the costs of business have risen, said ASM Mainuddin Monem, managing director and CEO of Abdul Monem Ltd.

"We are in a hard and rocky situation. Let the private sector survive; they will bring you economic growth and more jobs," he added.

Speaking as chief guest, Salehuddin Ahmed, adviser to the Ministry of Finance, acknowledged that the business environment has become somewhat difficult for businesspeople.

He said most businesspeople who were running large-scale operations have left the country, taking huge amounts of resources with them and leaving some banks empty.

The problems in the banking sector are significant, and the government is working on those. Ahmed informed that there were a huge number of outstanding bills that bankers needed to pay, and the government has repaid those.

"We owed money to many international financial institutions. They almost stopped their petroleum exports," he said. "Some of the ships were given orders halfway into their journey; unless you pay, the ship will divert to the Maldives or Sri Lanka or any other place."

"So, we repaid them, and the outstanding amount has been reduced to only $500 million or $400 million," he added.

Ahmed also said, "We have to create a business-friendly foreign exchange market, credit flow, regulatory regime, and revenue customs tax."

"I sometimes get news that really amuses me. You say the International Monetary Fund (IMF) has postponed its meeting to March, implying that money will not be coming. Bangladeshi people have great imagination," he said.

"But that meeting was postponed because there was no scheduled meeting in February," Ahmed added.

The NBR's key performance indicators should also include investment growth along with revenue growth, said Syed Nasim Manzur, former president of the Metropolitan Chamber of Commerce and Industry (MCCI).

"We are no longer a colonial country. I think the NBR has a significant responsibility to drive investment, growth and jobs," he added.

He further said discussions should now focus on the trade-to-GDP ratio, not the tax-to-GDP ratio, adding that Vietnam's trade-to-GDP ratio was 186 percent in 2022.

Sri Lanka, which recently bounced back from bankruptcy, has a trade-to-GDP ratio of 47 percent while it is 49 percent in India and 45 percent in Indonesia. In Bangladesh, it is 34 percent, Manzur said.

This low ratio in Bangladesh is partly due to tariffs. The average applied tariff in Bangladesh was 14.57 percent in 2007, which dropped to 13.87 percent in 2015, but rose again to 14.14 percent in 2022.

During the same period, Vietnam reduced its tariffs from 16.81 percent to 9.62 percent.

Manzur said production costs are rising, whether it be for exports or the domestic market.

In the Gazipur area, 51 factories have closed in five months, leaving 50,000 people jobless.

"The Vietnam free trade agreement makes their apparel and footwear significantly more competitive -- at least 14 percent cheaper," he said.

"So, there is no reason for them [foreign buyers] to come to us. They are going to Vietnam, Indonesia, Cambodia and India. Now, what can we do?" he asked.

Against this backdrop, he said entrepreneurs need access to long-term industrial credit at single-digit interest rates and access to duty-free raw materials.

While the private sector is struggling and the government is urging them to increase efficiency, the government is buying cars and raising salaries.

"This is not fair," Manzur said.

"Let's benchmark our competitiveness with Vietnam, Indonesia, and India on costs and speed to market," he said, suggesting tax incentives for skills training, policy continuity and a reduction of the total tax burden.

The EU-Vietnam free trade agreement has reduced tariffs on Vietnamese exports, particularly textiles and footwear, said Eric M Walker, vice president of AmCham.

Bangladesh, which currently benefits from duty-free access under the Everything but Arms initiative, will face tariff disadvantages once it makes the status graduation from a least developed country (LDC), he said.

"This shift could create significant competitive challenges for Bangladesh in global markets," he added.

Walker said Bangladesh must improve its infrastructure, simplify regulations and align with global sustainability trends to foster a strong trade and investment climate.

The country can create a more competitive and resilient economy by enhancing logistics, reducing trade barriers, and modernising public services, he added.

Despite claims of high economic growth by the previous government, both local and foreign investments have been static for about a decade in Bangladesh, said Fahmida Khatun, executive director of the Centre for Policy Dialogue (CPD).

Through a PowerPoint presentation, she recommended adopting a coordinated and unified trade and investment policy, implementation of National Tariff Policy 2023, ease of access to finance, preparation for LDC graduation, stabilisation of law and order, and eradication of corruption.

Corporates will be allowed to submit their tax returns online from next year, which will reduce their hassles, said Md Abdur Rahman Khan, chairman of the NBR.

For corporates, it will be easier for them to lodge their returns online, he added.

Over 12 lakh individual taxpayers submitted their tax returns online this year, and it will be higher in the coming years, hopes the NBR chairman.

Taxpayers can now submit their income tax returns year-round online, but they have to pay an extra charge, he said.

Regarding the withholding tax on head office expenses, he said it will be reviewed.

Acknowledging that the tax rate in the country is high, Khan said the NBR is ready to rationalise all taxes.

But the private sector will also have to come forward by showing every penny earned and spent in the tax returns, he said while speaking at the event as a special guest.

Regarding the VAT rate, he said, "Let us have a single VAT rate but based on proper accounting documents."

"Then, the VAT rate might be even lower. Now, some are not paying any VAT while others are paying a high amount. All businesspeople need to come to a consensus on a single VAT rate," he added.

"I don't believe that the custom houses should be money-making machines for the government. Rather, they should work as trade facilitators," Khan said.

Ala Uddin Ahmad, CEO of MetLife Bangladesh; Sabbir Ahmed, country manager for Bangladesh, Nepal and Bhutan at VISA Worldwide Singapore Pte; Muhammad Imrul Kabir, corporate affairs director at Chevron Bangladesh; and Syed Mohammad Kamal, country manager of MasterCard Singapore Holding, also spoke.