Make banks\\\' CSR fund use more flexible

Experts at a programme held in the city Saturday recommended flexibility in taxation in the case of money spent by banks on the corporate social responsibility (CSR) activities.
They also noted that CSR activities would not increase the profitability of any organisation, rather the same would help build its image and business sustainability in the long run. CSR is also not any favour to the community but it is the right of the general people from whom the companies are making profit, they added.
Their observations came at a roundtable discussion on "Policy Support to CSR in the Context of Tax Exemption for the Banking Sector" at the Bangladesh Institute of Bank Management (BIBM) auditorium. The roundtable was jointly organised by the Management and Resources Development Initiative (MRDI) and the BIBM, supported by Bangladesh Bank (BB).
BB governor Atiur Rahman was present as the chief guest while BB deputy governor SK Sur Chowdhury presented the keynote paper at the function. BIBM Muzaffer Ahmad chair Khandkar Ibrahim Khaled, BIBM director (training) Shah Md Ahsan Habib, Dhaka Stock Exchange Ltd chief executive officer Swapan Kumar Bala and National Board of Revenue member Syed Md Aminul Karim were present as the panel discussants, among others.
The Financial Express Editor Moazzem Hossain moderated the roundtable discussion while BIBM director general Toufic A Choudhury delivered the welcome speech and MRDI executive director Hasibur Rahman briefed on the initiative.
In his speech Atiur Rahman said according to a statutory regulatory order (SRO number 229, July 04, 2011) the companies get exemption of income tax at the rate of 10 per cent for actual money expended in CSR upon meeting some conditions. It will not be applicable for the amount expended in excess of 20 per cent of gross income of the company or Tk 80 million whichever is lower. Besides, these CSR activities must have prior approval by the government.     
"I think the CSR expenditure ceiling and percentage should be higher than Tk 80 million to get tax rebate as many banks are spending more than this," said the governor, adding other conditions for tax rebate should also be flexible.
The central bank chief said CSR is not a tax-related activity only rather the major social welfare took place through various philanthropic activities by some persons in early days. The BB is trying to motivate the newly emerged rich people of Bangladesh to contribute to the society from where they are benefited.
Citing examples of the Western Banks, he said they only looked for short-term gain and that's why some of them collapsed. The BB has always tried to keep the banks involved in real productive activities. Also BB has established a strict supervision system for the banks so that their CSR fund is spent properly, Atiur said while calling upon the banks to invest their CSR fund more in scientific research.
In his keynote paper, SK Sur Chowdhury said areas/sectors for tax exemption under CSR activities should be expanded and more sectors needed to be included in the list specified in the respective SRO. Also the banks should get a meaningful benefit of tax exemption and the rate of tax exemption on CSR activities needs to be reviewed. It will be logical to devise a progressive tax exemption structure that encourages increased involvement in CSR activities by the banks and financial institutions, he said.
Mr Chowdhury also drew attention to the condition 2 (b) and 5. He said as per condition 5, the companies have to take tax rebate certificate from NBR by submitting a written action plan for CSR activities. Terming the stipulation confusing and contradictory to the objective of CSR, he said the companies have to work in the time of emergency and natural calamity.
Ibrahim Khaled said the owners take profit and the employees get bonus and CSR is the share of the consumers. Citing example of TATA, he said the company spends 80 per cent of its profit for the consumers and 6.0 per cent is taken away by the family. The company spends most of the CSR fund for scientific research and health.
"CSR is not any favour to the consumers rather it is their right. We are not calculating the social benefit costing of our CSR activities," he added.
Mr Khaled expressed doubt over the initiative of encouraging socially unaware and uncommitted rich business people in CSR activities by giving incentive. Rather a system of social recognition can lure them better, he observed.
He also suggested reviewing the present list of CSR activities, absolute tax exemption on few unquestionable areas or personal donation before death and zero tax exemption if the CSR amount is less than Tk 10 or 20 million.
Dutch-Bangla Bank first vice president Mr Shahidullah expressed resentment over the complications in obtaining the CSR approval by the NBR.
"We have applied for approval of our CSR activities two years back. When the assessing authority wants any document for tax rebate, we can only show them the application," he said, adding: we spend Tk1.2 billion but get tax benefit of Tk 8.0 million.
Moazzem Hossain said CSR is a voluntary process which is necessary for community branding. Even in the absence of any tax rebate CSR activities will continue, he said.
He said the demand for tax rebate has been raised as corporate tax is the highest in Bangladesh in the region. He expressed the hope that the NBR would review the corporate tax rates in the ensuing budget.
He emphasised on corporate governance and compliance of the organizations and said a non-compliant entity is not even legally allowed to run CSR activities and NBR should not mention governance issues in the SRO.
MRDI chief Hasibur Rahman said banking sector is highly structured and it is spending huge amount of money every year. If 25 per cent of this amount can be brought to mainstream and is used for any specific development purpose it will be far more useful.
Except for other sectors, the question of tax exemption comes for the banking sector as it is structured and the CSR fund handling system of this sector is monitored by BB on which their annual report is published.