Corporate tax reduction, supportive export policy to hit a purple patch for BD economy
A reduction in corporate tax structure and framing a supportive export policy will help the economy grow further.
According to corporate sector insiders, reduction of corporate tax will encourage the companies to reinvest the money into the business, which is quite beneficial for the economy.
Moreover, retained earnings of the companies will also rise in addition to the better in-flow of foreign direct investment (FDI), corporate insiders said.
"Many of our entities, specially multinational companies are very transparent when it come to pay taxes by the employees as well as by the companies themselves who maintain their books of accounts very transparent to the shareholders and regulators," a foreign company source told the FE.
Their optimism grabbed the attention when National Board of Revenue (NBR) announced its plan to gradually reduce the rate of corporate tax starting from fiscal 2014-15.
" This is indeed a welcome move and is consistent with the recommendations of trade bodies and policy analysts," a source in the Foreign Investors' Chamber of Commerce and Industry (FICCI) said.
FICCI members together form the largest revenue- generating source for the government.
The combined contribution of FICCI members exceeds 30 per cent of total tax revenue collected by the government.
Historically the rate of corporate tax has been high and quite differentiated in Bangladesh.
In 1991-92, the tax rate was 40 percent in the case of publicly traded industrial companies, 45 percent in the case of non-publicly traded companies and 55 percent in the case of banks, insurance companies and financial institutions.
In a bid to provide support to the stock market, the actual applicable rate of corporate tax in the case of publicly traded companies has been linked to dividend payment. Thus, during 2000-2001 and 2001-02, the stipulated 35 percent corporate tax for publicly traded companies allowed 10 percent rebate on tax if more than 25 percent dividend was declared. In 2002-03, the rate of corporate tax was brought down to 30 percent and 10 percent rebate was allowed if more than 20 percent dividend was declared.
Supportive export policy
Bangladesh's exports to Asia, Middle East and North Africa will grow 15 percent a year over the three years to 2016 on the back of stronger global economic growth, according to a recent study by a leading foreign bank.
The country will see a major shift on its export destinations over the next 20 years, HSBC said in its latest Global Connections Report.
Bangladesh was also included in the HSBC Trade Confidence Index (TCI) for the first time, and scored 103. This indicates a marginally positive outlook for trade, slightly below China, India, Indonesia and Vietnam.
"It is therefore, absolutely imperative to diversify the export basket and also to run a strong campaign in favour of Bangladeshi products across the world," the market observer opined.
Even though the government could not meet its 2013 target for exports, it is eyeing more than 12% growth in Bangladesh's exports in 2014, from $28bn to more than $30bn.
There should be zero duty / supplementary duty on any export item to raise such earnings from export.
