Bangladesh’s scam-hit financial sector got another benefit from the government as finance minister AMA Muhith on Thursday proposed cut in corporate tax for banks, non-bank financial institutions and insurance companies by 2.5 percentage points.
Besides, Muhith in the proposed national budget for financial year 2018-19 also allocated Tk 15,963 crore as ‘investments in shares and equities’, mainly aiming to recapitalise scam-hit state-owned banks.
He proposed to cut corporate income tax of listed banks, NBFIs and insurance companies to 37.5 per cent from existing 40 per cent.
He also proposed to cut corporate tax to 37.5 per cent from 40 per cent for new banks, NBFIs and insurance companies that got licences in 2013 under political considerations.
The corporate tax for non-listed banks, NBFIs and insurance companies will be lowered to 40 per cent from 42.5 per cent.
Corporate tax for other companies, however, will remain unchanged despite repeated requests from chamber bodies and associations in recent times.
Muhith’s corporate tax benefits for financial sector came following a host of other benefits given to the sector amid loan scams and liquidity crisis in banks.
Bangladesh Bank recently lowered cash reserve requirement for banks, cut repo rate and the government allowed deposit of funds of government agencies up to 50 per cent of their reserve funds to private banks as the banking sector was grappling with liquidity
shortage because of rising defaulted loans.
In exchange, the government called upon the banks to reduce the interest rate to single digit, but no bank has taken any initiative to cut the rate in the last three months.
Without making any comment on banking sector scams, Muhith in his national budget speech only touched on the liquidity shortage.
‘In recent times, imbalance of liquidity in money market together with problems with the management of a few banks created worries,’ he said.
He, however, claimed that the situation was now under control for the ‘timely steps’ they had taken.
The increase in credit growth in private sector in recent times indicates higher investment by private sector, he said.
Muhith, on the other hand, allocated Tk 15,963 crore as ‘investments in shares and equities’ in the proposed national budget against Tk 11,945 crore allocations made in the original national budget for FY2017-2018.
From the original outlay, the government spent Tk 2,066 crore in FY18 to recapitalise the scam-hit state-owned banks like Sonali, Janata and Agrani.
Earlier, Centre for Policy Dialogue, a local think-tank, raised questions about the allocation of huge funds in the head of ‘investments in shares and equities’ terming it ‘shady’.
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