The cashless transaction conditions imposed on companies to benefit from the corporate tax reduction are unrealistic in the context of Bangladesh’s economy, the listed companies said.
The Bangladesh Association of Listed Companies (BAPLC), in its letter to Finance Minister AHM Mustafa Kamal earlier this week, appreciated the government’s proposal to reduce the corporation tax of listed companies by 250 basis points. basis at 20%, which would help boost corporate profits and the capital market.
But, the “conditions to be eligible for the reduced tax rate seem unrealistic”, the association said as the 2022 finance bill stipulated that all business receipts and income must pass through banking channels as well as all Expenses and investments exceeding Tk12 lakh in a year must be done through bank channels.
The economic activities of the country, the mode of execution of transactions, the size of the monetary economy, the availability of the banking network, the use of digital currency and the general prevailing socio-economic environment are not yet favorable. to the lack of cash in business, BAPLC said.
Companies that sell products directly to retailers rather than distributors, that have retail chain activities, or those that deal in agricultural inputs and outputs will not be able to fully meet the requirement. fundraising through a banking channel.
On the other hand, many costs like transportation, small purchases, casual labor bill, transportation, purchase of agricultural raw materials directly from farmers, etc. the transactions will not be able to be executed through banking channels, reads the letter from the BAPLC signed by its president. Anise Oud Dowla.
The association also called on the government to reduce the listed corporation tax on banks, non-banking financial institutions (NBFIs) and insurers by 250 basis points to 35% as they pay a very high tax of 37, 5% on their annual tax before tax. profits.
Many banks and NBFIs face capital shortfalls and struggle with their legal reserves. Tax savings would help them better cope with global inflation, the BAPLC said.
Companies spend 5% of their annual pre-tax profits to contribute to their Workers’ Profit Sharing Fund (WPPF) and the budget proposal to make the expense ineligible contradicts Section 244 of Bangladesh’s Labor Act 2006 , which stipulated that the contribution would be eligible in the calculation. corporate taxable income. It would also end up being double taxation – first in the hands of the company and again at the level of the beneficiary.
BAPCL requested to leave the WPPF contribution non-taxable.
Double taxation on dividend income should be eliminated, BAPLC reiterated. He said that dividends paid by subsidiaries should be exempt from tax in the hands of the parent company in the interest of an efficient business structure, the integrity of the country’s tax system and the adoption of the best global practices.
The withholding tax on interest income is 10% for all taxpayers and the government has proposed raising it to 20% for institutions.
“This provision will significantly discourage institutional investors from depositing their excess funds in banks and NBFIs. Banks and NBFIs will find it difficult to attract sufficient deposits and as a result their lending capacity will decrease significantly. private sector credit and investment will be severely affected,” BAPLC said, calling on the government not to raise tax on interest income.
In the draft budget for the financial year 2022-23, it was proposed to increase the withholding tax on revenue from the export of goods from 0.5% to 1%.
“The apparel sectors as well as other exporters are barely overcoming the disruptions related to the pandemic. In the current global context, the proposed tax rate for exporters would be extremely difficult. Therefore, we ask to maintain the tax rate at 0.5 to continue the growth of the country’s exports, especially the main income-generating clothing sector,” the listed companies’ association said.