15% tax on retained earnings of multinationals to affect FDI inflow

Imposing 15 per cent tax on retained earnings of the multinational companies and their stock dividends will affect the inflow of Foreign Direct Investment (FDI) as the companies will feel discouraged to reinvest from their earnings, said the official of a leading trade body today.

"I think from many chambers they raised this issue to be relooked. We do not have this money because retained earning does not mean that we actually have this money in the banks. We need to review this," said Shehzad Munim, president of the Foreign Investors' Chamber of Commerce and Industry (FICCI).

Munim said this while he was addressing a section of FICCI members at its regular luncheon meeting at the Westin Hotel in Dhaka with Mosharraf Hossain Bhuiyan, chairman of the National Board of Revenue (NBR) as the guest of honour.

The FICCI chief also said of the total, FDI that Bangladesh receives in a year, some 36–40 per cent comes from the retained earnings from the multinational companies those are operating in Bangladesh and reinvest every year.

"It is a significant amount that we actually retain within the business in Bangladesh that enables us to invest for growth and that is the main reason you have to retain earnings in the business," Munim said.

Most of the money will actually go out of the country if the tax is imposed on retained earnings as the owners of most of the companies' shareholders are from abroad.

"If we are to reinvest into the business, then we have to retain this money. If 15 per cent tax is imposed most of the companies will face serious problems. Paying 15 per cent tax is almost impossible for us," he added.