NBR expects quantum jump in corporate tax revenue in FY \\\'15

Corporate-tax collection by government is likely to go up substantially in the current fiscal year (FY) due to possible improvement in the financial performance of the commercial banks and large taxpayers in a relatively peaceful political situation in the remaining months, according to taxmen and bankers.
A set of fiscal measures for the FY 2014-15 may also add up to the pace of tax collection by the large taxpayers unit (LTU), they said.
The field level tax officials from the unit surpassed the tax-collection targets set for the months of July and August. The tax receipts were to Tk 5.50 billion and Tk 7.50 billion respectively in the first two months of the fiscal.
Officials expect higher amounts of taxes this month (September) from banks, large companies and individual taxpayers.
The government has set the highest growth target for corporate tax collection in the current year.
The National Board of Revenue expects a 32 percent growth in tax collection from this sector by mobilising Tk 168 billion.
The new tax measures include the imposition of new upfront taxes on interest income from the government securities -- both Treasury Bonds and Bills -- tax on Life Insurance gains and inclusion of state-owned entities, including the Bangladesh Telecommunications Regulatory Commission (BTRC).
The LTU eyes significant amounts of revenues from two major earning sources--some Tk 12 billion as upfront tax while Tk 13 billion from BTRC--in the current FY.
A senior tax official said the NBR faced some Tk 10 billion shortfall in corporate-tax collection in FY 2013-14 due to decline in operating profits of commercial banks in the 2013 calendar year.
"The LTU had tried with its all-out effort to minimise the shortfall in corporate-tax collection but could not make it up due to sluggish business trend of the large taxpayers," he said.
Some of the big businesses who were on top-20 list in terms of payment of taxes in FY 2012-13 relinquished their positions to others under the weight of losses in the last fiscal, he added.
Despite slowdown in business activity, some large companies paid higher taxes last year compared to that of previous year.
Grameenphone, Standard Chartered Bank, Islami Bank, HSBC, British American Tobacco, Bangladesh (BATB), and Eastern Bank Limited paid higher tax in FY 2013-14 compared to that of the previous year, according to the available data.
The leading mobile-phone-operator Grameenphone paid Tk 14.62 billion in income tax in FY 2013-14 that was Tk 13.31 billion in the corresponding period.
Multinational bank Standard Chartered paid Tk 5.72 billion last year compared to that of Tk 5.0 billion in FY 2012-13.
Islami Bank paid TK 4.71 billion against Tk 3.38 billion in the corresponding year.
HSBC paid Tk 4.05 billion in corporate tax last year against Tk 4.59 billion in the corresponding period.
Multinational tobacco company BATB paid Tk 3.5 billion in taxes while EBL Tk 2.21 billion last year.
The LTU officials said they are optimistic over achieving the tax target as major private commercial banks' operating profits increased in the first half of the current calendar year (2014).
Anis A Khan, Managing Director and Chief Executive Officer (CEO) of the Mutual Trust Bank Limited, said tax authority also imposes tax on the amount used for provisioning classified loans. This, he said, has increased tax collection from banks despite decline in their net profits.
It's a 'joke', he said about the taxing paradox he painted.   
But, he acknowledged that operating profits of the major commercial banks increased in the first half of the calendar year 2014.
Mr Khan, also Vice-President of the Metropolitan Chamber of Commerce and Industry (MCCI), said there were some special facilities offered by Bangladesh Bank until June 30, 2014, including the rescheduling of loan.
The flexible policy of the regulators helped the banks pick some profits in the January-June period, he added.
However, Mr Khan expressed his optimism about impressive performance of banks in 2014 despite withdrawal of those facilities.
He said MTBL achieved 74 per cent growth in H1 compared to that of the corresponding period's operating profits.
Bankers said operating profits bagged by banks increased as interest rates on deposits were lowered far below lending rates and foreign trade operations were sound.
Mohammad Masoom, Deputy Managing Director of the Mercantile Bank Limited, said the weighted average rate on deposits came down to 8.0 to 9.0 per cent this year from 10 per cent in the previous year.
On the other hand, the interest rate on lending to corporate segment is 15 to 16 per cent now.
This leaves a wide spread between the interest banks give to the depositors from among the public and the interest they charge from the borrowers.
"There is no political turmoil like that in last year. So overall performances of commercial banks are also expected to mark steady growth in the H2," he added.