The country's banking sector has proposed that the government bring down corporate tax rates in the upcoming fiscal budget in a bid to help them expand business and mobilise more funds.
Bankers have sought uniform tax rates for all publicly-listed companies revising the existing discriminatory rates, which is 20 per cent for other companies and 37.5 per cent for banks on both onshore and offshore incomes.
They said corporate tax collection would be jumped in the form of direct tax if the revenue authorities consider the proposal to cut tax rates for the banking sector to below 30 per cent.
According to OECD data, average corporate tax rate is 20 per cent in the South East Asia.
According to data of the Tax Foundation, corporate tax rate, in general, is 22 to 30 per cent in India followed by Sri Lanka 30 per cent, Malaysia 24 per cent, Indonesia 22 per cent, Singapore 17 per cent, Hongkong 16.5 per cent, the UK 25 per cent, France 25.82 per cent, Germany 29.94 per cent, Denmark 22 per cent, Italy 27.81 per cent and Australia 24 per cent.
Association of Bankers Bangladesh (ABB) Chairman Selim RF Hussain said initially it may assume that tax collection would be affected by tax cuts as they are major contributors of corporate income tax, but it will not happen.
"When banks would be able to invest more and expand its services, it will automatically generate more revenue than that of the government receiving now," said Mr Hussain, also managing director of BRAC Bank.
ABB leaders have recently placed their written proposals for the upcoming fiscal budget before the National Board of Revenue (NBR).
They have also congratulated NBR chairman Abu Hena Md Rahmatul Muneem, also senior secretary to the Internal Resources Division (IRD), on his tenure extension for the third term.
In the meeting, he assured bankers of considering their proposals and reviewing if there is any illogical tax burden on the banking sector.
He, however, has pledged to bring down the corporate tax rates in phases in the coming years.
The ABB leader said the association has agreed with the government's initiative to ensure tax compliance by making proof of submission of tax returns (PSR) mandatory.
However, the provisions could be made flexible for SME sector as it is becoming difficult to collect their PSR due to multiple reasons in the context of Bangladesh.
Such hindrances are driving them away from banking sector to informal sector to seek loan.
The ABB has proposed allowing small loan up to Tk 5.0 million without PSR for the sake of small and medium entrepreneurs (SMEs).
It also suggested allowing a ceiling up to Tk 0.5 million without PSR for credit card holders.
The ABB has also proposed exempting tax on the Corporate Social Responsibility (CSR) so that corporates can pour more fund into such voluntary activities.
The bankers have suggested considering tax benefits to encourage banks investment in zero coupon bond, withdraw tax on private employees provident and gratuity fund, withdrawal of excise duty on bank loans and credit cards.
Other proposals include raising the approval limit of incidental expenses or perquisites of the company to Tk 1.5 million, excluding incentive bonus to employees from the scope of perquisite and allowing VAT exemption on security custodial services of banks.
Masud Rana, chief financial officer of BRAC Bank, said none of the countries have so far different tax rates for banks like Bangladesh.
Slashing corporate tax rates would help the banks inject liquidity in the cash-crunch economy, he added.
Mr Rana has also sought reconsidering the tax on provisioning amount of banks that have to keep as per guidelines of the central bank against non-performing loan (NPL).
He has also suggested withdrawing super tax on stock dividend payment and retained earning transfer to discourage cash dividend.
Mr Rana has observed the existing excise duty on loan account harsh as they have to pay excise duty twice - one on loan account and another on current account.
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