Mirza Azizul suggests corporate tax cut in new budget

The budget for the new financial year should announce a cut in corporate tax, says AB Mirza Azizul Islam, who advised a former caretaker government on economic affairs.

He also stressed need for the budget to be “realistic” and gain people’s confidence.

Finance Minister AMA Muhith will present his ninth budget on Thursday.

In an interview with bdnews24.com, he described corporate tax as being rather steep in Bangladesh and suggested it should be reduced.

The former Securities and Exchange Commission chairman is of the view that incentives should be cut, on the one hand, and tax reduced, on the other.

The present corporate tax rate for the country’s banks, insurance and financial institutions is 42.50 percent. And the rate is 45 percent for mobile phone service providers.

However, they get a five percent rebate if they are enlisted with the capital market.

Cigarette manufacturing companies, too, are subjected to a 45 percent tax, and they, too, are entitled to a five percent rebate if listed on the stock market.

Enlisted companies have to pay a 27.50 percent tax, but if in the event of declaring less than 20 percent dividends they have to pay tax at an enhanced rate of 37.50 percent.

While advocating corporate tax cuts, Mirza Aziz also stressed that the government should step up measures to prevent dodging tax.

“The tendency to evade taxes must be curbed. There are two types of evasion.

“One is the refusal to pay up outstanding taxes. The other is the propensity of some people not to file returns, though they are in a position to do so.

“There is no alternative to making the budget realistic if people’s confidence is to be earned.”

“I have seen budget goals being missed for the past four years. Revenue collection, overall expenditure, GDP growth, inflation – the targets remained unattained in all cases,” he said.

Muhith has, meanwhile, said the size of the current FY’s budget would be pared down to Tk 2.4 trillion from the original Tk 2.55 trillion.

The GDP growth had been projected at 7.3 percent but it came to 6.51 percent at the end of the first nine months of the current FY.

Mirza Aziz, who placed two budget proposals during 2007-8 caretaker government, favours increased allocation in “important” areas such as education and health.

“I feel the budgetary allocations should be increased in certain fields such as health and education.

“The allocations for these two sectors in the 2014-15 FY was, in comparative terms, less than what they were in the budget of 2008. Hence, it is necessary to increase them,” he said.

He also feels more money should be parked for social security schemes.

“The number of poor people in our country is still very high. Many communities live below the poverty line. 

“Moreover, areas such as infrastructure and power usually get priority and, in all probability, there would be no exception this year either.”

The government should also give policy support to help the capital market recover from its current slump, he said.

“A lot of policy statements are made in a budget. It should also give some guidelines on ways to revive the stock market,” said the former chairman of the Securities and Exchange Commission.