Although a reduction in corporate tax was the prime demand from private sector businesses, the government did not do it across the board
Non-listed companies will get a 2.5 percent corporate tax cut from the 2020-21 fiscal year, according to the budget proposal placed in the parliament on Thursday.
"To ease the tax burden on our valued taxpayers during this critical time of the Covid-19 pandemic, I propose a 2.5 percent reduction in the tax rate for non-publicly traded companies and fixing it at 32.5 percent from the previous 35 percent," said Finance Minister AHM Mustafa Kamal.
Although a reduction in corporate tax was the prime demand from private sector businesses to get breathing space amid huge losses incurred during the pandemic, the government did not do it across the board.
As a result, the tax gap will reduce between listed and non-listed companies.
The corporate tax rate is 25 percent for publicly listed companies and 35 percent for non-listed firms, except for financial institutions.
Listed banks and financial institutions have long been demanding that their corporate tax rate be reduced to 32 percent from the existing 37.5 percent.
The cry for a tax cut grew louder after the novel coronavirus broke out in Bangladesh as the banking sector is now burdened with implementing the stimulus packages. Moreover, the interest rate cap has drastically eroded the profitability of banks.
But their demands did not ultimately get attention in the budget as the government is also under pressure of collecting financing in a slowing economy.
Dhaka Chamber of Commerce and Industry (DCCI) President Shams Mahmud told The Business Standard, "I congratulate the government's decision of reducing corporate tax by 2.5 percent for non-listed companies. Besides, the government will have to patronise the private sector for implementing the GDP growth target during the pandemic."
He also said the government should make sure to remove obstacles for private sector businesses during this crisis.
Md Ali Zaman, president of the SME Owners Association of Bangladesh, said reducing corporate tax for non-listed companies will play an important role in the private sector during the pandemic as entrepreneurs will get benefits from it.
As a result, companies will be able to produce products at reasonable costs and the customers will be able to buy those at reasonable prices, he added.