Banks call for exemption from stock dividend tax
Banks have sought to be excused from the government’s decision to introduce tax on both stock dividends and retained earnings.
Finance Minister AHM Mustafa Kamal in his budget for fiscal 2019-20 proposed introducing 15 percent tax on stock dividends and retained earnings with a view to encouraging cash dividend.
“It makes sense for other listed companies but not for banks as our dividend policies are transparent and regulated,” said Syed Mahbubur Rahman, president of the Association of Bankers, Bangladesh (ABB), a forum of private banks’ managing directors, in letters to the Bangladesh Bank and the National Board of Revenue yesterday.
If the proposal goes through it would have an adverse effect on banks’ capital base.
Banks will have to maintain at least 12.50 percent capital against their capital adequacy ratio under the Basel III guidelines within this year but the proposed tax will create a roadblock, the letter said.
“The budgetary proposals will more or less have an adverse impact on the entire banking sector,” he said.
The ABB hopes that the government will withdraw the tax.
In an another letter issued on June 19, the ABB said the cost for issuing new credit and debit cards would increase significantly as the government imposed fresh tariff on their import.
In the proposed budget, $0.70 has been imposed as import tariff on each magnetic stripe card, $2 for chip-and-pin card and $3 for contactless card.
Though there was no declared tariff on card import, customs used to charge a maximum $0.52 on each card.
Given that the government and the central bank are pushing for creating a cashless society, the new rates are illogical, said Rahman, also managing director of Dhaka Bank.
The move will discourage clients from asking for credit and debit cards as banks will be compelled to impose charges for issuing them, he added.
