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Finance Minister signals major changes in corporate tax

The government plans to bring major changes to the existing corporate tax structure within the next two years for greater efficacy, Finance Minister AMA Muhith said yesterday.

“Our corporate tax system is not effective at all. This will go through a change this time,” he told a delegation of the Dhaka Chamber of Commerce and Industry (DCCI) at his office in the secretariat.

He said there would be “some fundamental changes??? to the corporate tax structure by the second year of the government. “You should start thinking about it from now on.???

The minister, however, did not elaborate on the planned changes.

The lowest corporate tax in Bangladesh is now 27.5 percent and the highest 45 percent. There are, however, tax rebates for listed companies that declare dividends at rates more than 20 percent.

Analysts said the country’s corporate tax rate, the highest in the Saarc region, is a key factor warding off potential domestic and foreign investors.

The average rate of corporate tax is 42.5 percent in Bangladesh, which is 30 percent in India, 35 percent in Pakistan, 25 percent in Nepal, 30 percent in Bhutan, 20 percent in Afghanistan and 28 percent in Sri Lanka. In the Maldives, corporate tax is 25 percent for only commercial banks.

The Federation of Bangladesh Chambers of Commerce and Industry has already called for cutting the corporate tax, but in phases so that individuals feel encouraged to be part of the corporate culture.

On bringing down interest rate to single digit, the finance minister said a notion has deepened in Bangladesh that the banks’ lending rates would be between 12 percent and 18 percent.  “I myself had propagated the idea of cutting down the interest rates 30 years ago, but nothing has changed. So, we have to think something new.”

Muhith said the agreement for constructing the expressway between Zero Point in Gulistan and Mawa would be finalised this year. The project will cost $150 million, with the government providing $100 million.

The finance minister also expressed disappointment over the snail-paced implementation of the Dhaka-Chittagong and Dhaka-Mymensingh four-lane highways and blamed the respective contractors.

Among a range of demands, DCCI President Shahjahan Khan said the government should take measures to bring down the spread between lending and deposit rates to 3 percent so credit flowing to the private sector gains momentum.

He also demanded continuation of the 2 percent incentives for readymade garment sector for exploring new markets for export.


Source: Daily Star

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