Corporate tax cut won’t fetch investment: CPD

Independent think tank Centre for Policy Dialogue (CPD) today batted against business’ demands for reduction in corporate tax, saying it will not ensure investment.

According to what they said, reducing corporate tax is effective in attracting private investment only when the overall investment climate is conducive for business.

“A number of studies on the nexus between corporate tax and private investment, using both macro and micro level data, found that the reduction of corporate tax rate, in general, fosters private investment,” Prof Mustafizur Rahman, distinguished fellow of CPD, said.

He was presenting a paper “State of the Bangladesh Economy in FY 2017-18” at BRAC centre Centre inn at Mohakhali in Dhaka today. CPD suggested, corporate tax rates should not be reduced in a hasty manner and on an ad-hoc basis.

Rahman said corporate tax rate is an important source of revenue for Bangladesh which contributes about two-thirds of income tax collection. He argued that reducing corporate tax entails negative implications for the economy, including discrimination against other businesses.

CPD’s concern with the corporate tax rate comes at a time when businesses are demanding to cut corporate tax from existing 45 per cent to 25 per cent. Finance Minister AMA Muhith has also hinted that he will bring down the tax rate in the budget.

In Bangladesh corporate tax incentives are provided in a number of areas including tax holiday in general, various tax incentives to power sector, economic zones and exporters.

He also suggested the government to raise the tax free income ceiling to Tk 3 lakhs, and reducing the first slab of PIT rate to 7.5 percent from the prevailing rate of 10 percent.