National Board of Revenue chairman Md Mosharraf Hossain Bhuiyan on Thursday said that they would impose a condition on banks that they (banks) would have to bring down the interest rate on loans for enjoying the reduced rate of corporate tax as proposed in the the national budget for the fiscal year of 2018-19.
‘Though the government is yet to impose the condition directly, the condition will be enforced ultimately,’ he said at a post-budget discussion.
Metropolitan Chamber of Commerce and Industry and Policy Research Institute organised the discussion titled ‘budget 2018-2019: views of the business community’ at the MCCI conference room in Dhaka.
Finance minister AMA Muhith proposed reducing the corporate income tax rate by 2.50 percentage points to 37.5 per cent and 40 per cent respectively for publicly traded and non-publicly traded banks and financial institutions for the next fiscal year of 2018-2019.
‘We will be able to put pressure on banks for bringing down interest rate in exchange of the benefit,’ Mosharraf said.
Banks will not be allowed to avail themselves of the corporate tax benefit if interest rates do not remain on track, he said.
The NBR is mulling over the condition, he said.
Banks have already decided to bring down the interest rate to single digit, he said, adding that the reduction in the interest rates would facilitate private investment in the country.
Mosharraf said that the government considered reducing the corporate tax rate and luckily banks and financial institutions, being the corporate taxpayers at the highest rate after mobile phone company, got the benefit.
He said that the government did not propose increasing the tax-free income threshold for individual taxpayers as they were already enjoying the highest level of exemption considering the per capita income.
The NBR is also planning to make use of electronic fiscal devices mandatory for transactions of all shops — small and large — to ensure VAT collection properly, he added.
At the meeting, PRI executive director Ahsan H Mansur said that there should be a condition that only those banks which would reduce lending rate to below 10 per cent would be eligible to receive the tax break.
‘The reduction in corporate tax rate only for the financial sector appears at odd with the state of governance in the sector and gives rise to the perception that the public money is being used for rewarding the continued mismanagement in the sector,’ he said.
He, however, criticised the decision taken by the Bangladesh Association of Banks setting the lending rate at 9 per cent saying that it was an illegal and wrong approach.
The bank owners’ organisation on Wednesday announced that banks would bring down the lending rate to 9 per cent and deposit rate to 6 per cent from the next month.
Mansur said interest rate should be market based and Bangladesh Bank as a regulator should take steps to handle the issue, not the BAB.
He said the targeted GDP growth rate at 7.8 per cent would be challenging unless private sector investment rebounds strongly.
Attaining ambitious revenue collection target will be impossible in absence of reforms in tax laws and administration, he added.
MCCI president Nihad Kabir said that shrinking number of new jobs despite the high GDP growth reported was a major a concern that should have been addressed in the budget.
She also said that attaining the increased revenue target for FY19 would continue to be a major challenge.
Nihad hoped that the government would increase the tax-free income limit for individual while approving the proposed budget.
MCCI tariff and taxation sub-committee member Adeeb H Khan presented an analysis of the proposed Finance Bill-2018 at the programme.
PRI chairman Zaidi Sattar and ACI Limited chairman M Anis Ud Dowla spoke while MCCI vice-president Golam Mainuddin and Gonoshasthaya Kendra founder Zafarullah Chowdhury attended the programme, among others.
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