CPD criticises lowering corporate tax for banks, financial institutions

The Centre for Policy Dialogue (CPD) today strongly opposed the government's move to lower corporate tax rate for banks, insurance and financial institutions by 2.5 percent in the proposed national budget for FY2018-19.

"This will give wrong signal," Dr Debapriya Bhattacharya, a distinguished fellow of the CPD, said at a press briefing today.

"The government should not give such facility to the owners of banks and financial institutions without stopping the anarchy which is going in the banking sector," he said.

The move may lead to loss of revenues worth about Tk 1000 crore and is highly unlikely to increase liquidity, CPD said in its analysis of the National Budget for FY 2018-19.

The government has failed to give priority to needed reforms to modernise the country's tax system, the think tank said in the analysis.

The think tank came up with the analysis after Finance Minister AMA Muhith at the Jatiya Sangsad yesterday rolled out a Tk 4,64,573 crore national budget for fiscal year 2018-19 setting the GDP growth target at 7.8 percent.

Terming the budget as one of "status quo", Dr Debapriya said it largely reflected the economic policies and tendencies seen in the last one decade.

"The budget statement builds more on a review of the past, rather than a focus on the future," CPD said in its analysis.

The proposed budget also lacks sensitivity towards existing situations and emerging macro stresses being built up on the economy such as pressure on balance of payment and exchange rate, inflationary expectations, it said.

It also gave less attention to areas that require reforms, alongside providing no well-crafted action plan to implement the budget and making concrete initiatives towards strengthening of implementing institutions and oversight mechanisms.

The CPD, however, lauded a number of fiscal measures that have been taken to strengthen domestic-oriented industries and enhance revenue earning.

The think tank welcomed the initiatives on health and environmental issues proposed in the budget, including a 5 percent supplementary duty imposed on polythene and plastic bags.

It also appreciated the move to provide support to the social safety net programmes.

However, the think tank expressed concern that the anticipated (food and non-food) price pressure will fall disproportionately on low income people and worsen consumption and income inequality situation.

It also worried that lower and middle income groups would have to bear the pressure of the higher (indirect) tax.

Moderated by CPD Executive Director Fahmida Khatun, CPD Distinguished Fellow Prof Mustafizur Rahman, CPD Research Director Khondaker Golam Moazzem and CPD Research fellow Towfiqul Islam Khan also spoke at the occasion.