Bankers propose corporate tax cut to 30% for listed banks

The Bangladesh Association of Banks (BAB) has urged the National Board of Revenue (NBR) to reduce the corporate tax rate by 7.5% from the existing 37.5%, especially for the banks that are listed in the stock market.

The bankers' association put forward the proposal in a pre-budget discussion, organised by the NBR in the capital's Agargaon on Sunday.

The written proposal, signed by BAB Chairman Md Nazrul Islam Mazumder, reads, "Considering the current business situation, we strongly urge that the existing tax rate be reduced from 37.5% to 30%, especially for the listed banking companies." 

The chairman of the BAB, however, was not present in the meeting. Mizan Chowdhury spoke on behalf of the association.

NBR Chairman Abu Hena Md Rahmatul Muneem presided over the meeting attended by the representatives of banks, non-bank financial institutions, Dhaka Stock Exchange, Chittagong Stock Exchange, and Bangladesh Insurance Association.

The BAB also proposed a 1% of loan loss provision (refers to funds set aside by a bank to cover bad loans) as allowable expenditure which is currently not allowed and subject to taxation.

In the proposal letter, the association said, "Loan loss provision is a kind of business loss similar to the nature of other business where revenue is not realisable. In this context, banks are required to go through a very transparent process including filing suit and taking other appropriate measures as per the Bangladesh Bank guidelines."

"If this is considered as allowable expenses, banks' financial statement will be more reflective of actual performance and will feel incentivised to take the appropriate level of loan loss provisions to cover the risk properly for the long-term sustainability of the bank," reads the proposal.

The association also proposed to reduce corporate tax for merchant banks from 37.5% to 20% and not deduct income tax from the eligible beneficiaries of NBR's double taxation avoidance agreement.

The Double Taxation Avoidance Agreement (DTAA) refers to a tax treaty signed between Bangladesh and another country (or multiple countries) so that taxpayers can avoid paying double taxes on their income earned from the source country as well as the residence country.

'China, India can buy oil from Russia cheaply, we cannot'

NBR Chairman Abu Hena Md Rahmatul Muneem, in the meeting, said "Tax-related decisions are taken to enhance the NBR's capacity. Not only the revenue collection but also the issues of ease of doing business, industrialisation and employment are taken into consideration before making a decision."

Highlighting the importance of self-reliance, he said, "China and India can buy oil from Russia cheaply, but we cannot. Because they are self-reliant nations. We too have to make revenue-related decisions in a manner so that we won't have to take alms from anyone."