Tax Free Foreign Exchange Earnings for Flagships on Maps

According to Treasury officials, the government has decided to grant tax exemptions to foreign exchange earnings of Bangladeshi-flagged seagoing vessels to earn US$3-4 billion a year from the upcoming fiscal year.

Currently these local vessels have to pay 10% tax on their earnings.

Ministry officials said the facility will remain in place until 2030, when the ships’ foreign exchange earnings would be brought into the country through bank channels.

Pundits and industry insiders praised the government’s decision, saying it was a milestone in establishing the shipping industry as a service export sector with huge foreign exchange earnings for the country.

“This will be a timely move to encourage investment in the maritime shipping industry, which is a very potential sector,” Professor Mustafizur Rahman, Distinguished Fellow at the Center for Policy Dialogue (CPD), told The Business Standard.

The government has taken initiatives to incentivize industries with earning potential in recent years, he added.

He also said that this is the right time to invest in the shipping industry as the Covid-19 pandemic has led to a massive increase in freight costs.

Meanwhile, industry insiders said the initiative was a long time coming.

“We are absolutely thrilled. It was a long-standing demand and a much-needed move for this industry,” said Shahriar Jahan Rahat, deputy general manager of KSRM Group, the country’s largest ocean-going fleet owner.

“We anticipate that the move will boost development [shipping] industry and increase the flow of foreign remittances through this sector,” he added.

According to the Mercantile Marine Department, Bangladesh currently has a fleet of 81 ocean-going vessels, with the KSRM Group alone owning 23 ocean-going bulk carriers.

Also, Meghna Group of Industries owns 16 ships, Akij Group owns 10, State-owned Bangladesh Shipping Corporation owns 8, Karnaphuli Group owns 6, and Bashundhara Group and BSA Group owns 5 ships each.

Sources say the sector is investing $2 billion.

Bangladeshi companies have to spend over $9 billion in freight costs for export and import, but local ocean-going vessels can only tap 10-15% of that, which is less than $1 billion.

Industry leaders have urged local entrepreneurs to invest in new ships, noting that increased freight costs have created a lucrative opportunity for shipping sector growth.

They said that with new investments it will be possible to earn about 3-4 billion dollars in foreign currency every year.

In the last 10 years, export and import increased by about two and a half times, but the number of vessels flying the Bangladeshi flag did not increase.

However, 2019 had been a different year when things started to change.

According to the Ministry of Shipping, there are 4,565 Bangladesh-registered seafarers, of whom 1,887 work on Bangladeshi and foreign vessels.

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