Saturday, 23 June 2018


Reducing bank corporate tax is logical


OurtimeBD.com
10.06.2018

Dr. Ahmed Al Kabir, Former Chairman, Rupali Bank

Dr. Ahmed Al Kabir, Former Chairman, Rupali Bank : The proposal to cut corporate tax for banks in the upcoming budget is logical. Previously, the rate was very high, but now it is at a reasonable level. Excluding cigarettes and a few other sectors, nearly every other sector has been reduced to or below this level. The banking sector corporate tax has been rationalized, thanks to this proposal.
Prior to this, many have been saying that there was inactivity in investment because of a high corporate tax ceiling. Hopefully, this perspective will now change. There have been calls for reducing corporate tax in the banking sector for some time as the rate was very high. The ‘ultimate beneficiaries’ of this proposal to reduce tax will be the shareholders of the banks, because banks are part of the stock market. Nevertheless, it does not mean that only a small group will benefit from the reduction. We want to revitalize the stock market. The banks have been dominating the stock market for a long time. Hopefully the banks’ presence in the stock market will be more active from now on. It is not true that reduction of corporate tax rate will excite the banking sector. The proposal made in the budget was to reduce tax rate by 2.5% — not a large change by any means.
Many private banks are keeping a 6-7% spread. They collected at 5-6% and lent at 11-12%. Bangladesh Bank has stated that this level should be kept at 4%. In his budget speech, the finance minister has said this level has to be kept within 5%. The advice or order of the central bank and finance minister should be implemented. Therefore, Bangladesh Bank has to strictly monitor this. If this becomes possible, the interest rates will automatically fall down to single-digit or a sustainable level. However, no one can be forced in this regard as this is the private sector. If forced, it will lead to the assumption that the private sector has lost its character. I believe that the interest rate will be monitored in the new fiscal year and if Bangladesh Bank takes this responsibility, interest rates will remain within 9-10%.
Based on an interview by Ashiq Rahman, translated by Abrar Hussain


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