The government is set to cut corporate income tax by 2.5 percentage points in a bid to encourage compliance with a condition promoting cashless transactions.

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Finance Minister Abul Hassan Mahmood Ali today proposed the 25 percent corporate tax to replace the existing 27.5 percent for non-listed companies, subject to one condition.

The condition is that all types of income, receipts, single transactions of over Tk 5 lakh and all annual expenses and investments exceeding Tk 36 lakh be done through bank transfers.

Similarly, the minister proposed that listed companies which offloaded at least 10 percent of shares in the stock market and abided by the bank transfer condition be able to avail an income tax reduction from 22.5 percent to 20 percent.

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If the share offloading is less than 10 percent, the company has to pay income tax at a rate of 25 percent.

However, if this company abides by the bank transfer condition, the income tax rate will be 22.5 percent.

"In order to further formalise the economy and encourage the establishment of one-person companies, I propose to make the one-person company tax rate from 22.5 percent to 20 percent, subject to compliance with the same conditions as non-listed companies," said the finance minister.