Wali Bhuiyan, president of the Foreign Investors' Chamber of Commerce and Industry (FICCI), said the issues like red-tapism, corruption, harassment of honest taxpayers and law and order must be addressed properly to retain the investors who are already here.

"It is extremely sad to note that there is practically no incentive for any honest person to remain honest. Higher the level of dishonesty, better they are in society. Under such an environment, a pertinent question to ask, why remain honest? Everyone can see that crime has become a profitable business," he said.

Bhuiyan made the observations at the monthly luncheon meeting of FICCI held at Sonargaon Hotel in Dhaka where Dr Shoeb Ahmed, chairman of the National Board of Revenue (NBR), spoke as guest of honour.

He pointed out that combating corruption and maintaining law and order would bring more investments, both domestic and foreign.

The FICCI chief laid stress on mobilisation of domestic resources through collection of more internal revenues, reduction of tax evasion and streamlining the revenue administration by reducing discretionary authority of its officials.

Responding to the issues raised by the FICCI, the NBR chairman said the government is taking measures for reforms in tax administration which will ease pressure on the honest taxpayers and also increase collection of income tax.

He, however, admitted that the government could not do much for the honest taxpayers.

Citing examples of random malpractice in tax evasion, he mentioned cigarette companies in Bangladesh, other than a multinational company, do not pay proper tax that prompted the government to introduce highly expensive banderole system.

The FICCI president said good policies have been formulated to retain the existing foreign investments and attract more FDI, but the policies must be implemented effectively to create an enabling environment.

To this end, appropriate reforms in the governance, fiscal, financial, monetary and legal systems are the needs of the hour, he added.

Wali Bhuiyan mentioned the present government has been quite aggressive in revenue collection and had been able to make significant achievement. But in that process of higher collection, quite often tax officials had been unreasonable and arbitrary in their approach towards honest taxpayers, he said.

"The discretionary authorities to down the line officials have been creating hassle to tax compliant businessmen," he added.

He criticised the recently enacted regulation that made payment of royalty, technical services fee, technical know-how fee or technical assistance fee as being inadmissible expense if these exceed 2.5 per cent of a company's profit for the period.

"This is disappointing to the existing investors and a disincentive to the potential foreign investors. It is the first time that remittance of such kind is linked to profit," Bhuiyan observed.

Foreign exchange regulation of the central bank permits technical fees up to six per cent of net sales without recourse to any government agency for permission, he said adding any curtailment of such a facility would discourage investment.

The FCCI president also expressed his dissatisfaction over the recently imposed dividend distribution tax for companies. "This would certainly be detrimental to the welfare of the capital market," he said.

In reply, the NBR chairman said dividend distribution tax exists in many other countries. Citing example of India, he said in India this tax is 12.5 per cent but the rate in Bangladesh is 10 per cent.

"The government does not have any plan to backtrack from what has been done in this regard," he said.