রবিবার, অক্টোবর ২৫, ২০২০
জাতীয় ডেস্ক
৯ আগস্ট ২০২০
৯:৩৯ অপরাহ্ণ
Increase in Corporate Tax Payment - Is it a symbol For National Economic Growth?
Increase in Corporate Tax Payment - Is it a symbol For National Economic Growth?

৯ আগস্ট ২০২০ ৯:৩৯ অপরাহ্ণ

Two months back, a business report published in "Star Business" of The Daily Star drew my attention. The Daily Star is the leading English daily published in Bangladesh. The report highlighted the rise in revenue collection this year. it's really delighted news that the revenue collection has increased by 1000 crore (100 crores = 1 billion).

The report also presents a list of the highest ten taxpayers for both corporate tax and also for VAT. The report mentions the tax amounts for these firms for the amount of 2004-2005, 2005-2006, 2006-2007, and 2007-2008. consistent with the info presented within the report, most of the firms' payment has increased just in case of both corporate tax and VAT. The chairman of the National Board of Revenue (NBR), Peoples Republic of Bangladesh, is additionally happy to announce this news. He mentions it as an excellent success for NBR.

Yes, it's a hit for NBR. But, does the news indicate a positive economic process within the country? The question is often resolved by calculating the speed of change in tax payment and VAT payment for each period.

If we analyze a budget, we discover tax as a function of profit. As profit is that the difference between income and expenses, change of tax is additionally a function of change in income or expenses. Mathematically we will express this idea as:

Profit = Income - Expenses
Tax = Profit * rate 

If we consider two consecutive years' tax amount as Tax1 and Tax2, the Percentage change in tax amount, (Tax2 - Tax1) / Tax1

= (Profit2 * rate - Profit1 * rate ) / Profit1 * Tax rate
= (Profit2 - Profit1) / Profit1
= [(Income2 - Expenses2) - (Income1 - Expenses1)] / (Income1 - Expenses1)

Hence, the tax rate of growth would be positive if revenue is often increased or expenses are often reduced. Alternatively, the tax rate of growth can become negative if revenue falls or expenses increase.

For a private firm, positive or negative growth in tax is often treated as a sign for fulfillment or failure in management performance. When it happens for many of the highest corporate taxpayers, it's no more individual performance. It becomes a problem with the general economic process of the country.

Unlike a tax, VAT is directly related to sales or revenue. If VAT growth increases, it must indicate a positive sales growth. If VAT growth declines, it must raise a question about sales growth. Hence, most of the top ten VAT payers' positive or negative growth in VAT payment naturally indicate the positive or negative economic process of the country.

The top 10 corporate taxpayers' list includes seven banks, two gas companies, and one mobile operator. Grameen Phone tops the list with a payment of TK 435 crore taxes within the period of 2007-2008. Its previous period's tax payment amounts to TK 128 crore. Hence the tax amount grew by 239.84% within the period of 2007-2008. But, what was the tax rate of growth within the previous years?

Table 1: Top 10 Corporate tax payers (Source: The Daily Star, July 10, 2008)

Company name -Tax amount (In crore TK) - Change in tax payment 2007-2008 - 2006-2007 2005-2006 - 2004-2005 - 2007-2008 - 2006-2007 - 2005-2006

Grameen Phone 435 128 28 6 239.84% 357.14% 366.67%

Standard Chartered Bank 220 188 86 41 17.02% 118.60% 109.76%

Chevron Bangladesh Blocks 13 and 14 Ltd 180 81 11 - 122.22% 636.36% -

Islami Bank Bangladesh Ltd 161 101 65 2 59.41% 55.38% 3150.00%

Titas Gas (T&D) Company Ltd 136 97 70 - 40.21% 38.57% -

HSBC 118 78 42 4 51.28% 85.71% 950.00%

Southeast Bank Ltd 88 49 11 5 79.59% 345.45% 120.00%

Pubali Bank Ltd 78 44 - 0.12 77.27% - -

Citi Bank NA 76 52 28 14 46.15% 85.71% 100.00%

Prime Bank Ltd 67 47 26 - 42.55% 80.77% -

In 2005-2006, Grameen's tax amount increased by 366.67%, while in 2006-2007, tax grew by 357.14%. Hence the expansion rate has reduced per annum. Most of the other firms of the list had an equivalent phenomenon. The tax rate of growth for normal Chartered Bank for the last three periods was 109.76%, 118.60%, and 17.02%. Hence in 2007-2008, the tax rate of growth drastically fell for this bank. The exceptions of this list are Islami Bank Bangladesh Ltd and Titas Gas (T&D) Company Ltd. Titas Gas had 38.57% tax growth in 2006-2007, while the expansion rate was 40.21% in 2007-2008. On the opposite hand, Islami bank's tax growth increased by quite 4% in 2007-2008. But in 2006-2007, their tax rate of growth fell sharply. during this period, their tax growth was only 55.38%, while in 2005-2006, their tax growth was 3150%.

A nearly similar story is written for the highest 10 VAT payers in the '07-'08 term.

Table 2: Top 10 VAT payers (Source: The Daily Star, July 10, 2008)

Company name - VAT amount (In crore TK) - Change in VAT payment 2007-2008 - 2006-2007 2005-2006 - 2004-2005 - 2007-2008 - 2006-2007 - 2005-2006

British American Tobacco 2828 2481 2079 1852 13.99% 19.34% 12.26%

Grameen Phone 1438 918 985 345 56.64% -6.80% 185.51%

Dhaka Tobacco 1180 1029 962 712 14.67% 6.96% 35.11%

Titas Gas Field 764 835 819 789 -8.50% 1.95% 3.80%

Sheba Telecom 601 252 224 - 138.49% 12.50% -

Hobigonj Gas Field 465 494 512 546 -5.87% -3.52% -6.23%

AKTEL 277 237 328 110 16.88% -27.74% 198.18%

Kailashtila Gas Field 196 159 99 110 23.27% 60.61% -10.00%

Rural Electrification Board 105 18 24 - 483.33% -25.00% -

Rashidpur Gas Field 101 125 138 170 -19.20% -9.42% -18.82%

Out of the ten, five firms had reduced growth in VAT payment during this period compared to '06-'07. Three of those firms had negative growth in VAT payment for the year 2007-2008. Out of those ten firms, Grameen Phone, Sheba Telecom, and REB had very sharp growth in 2007-2008. Grameen had a rise in their growth in VAT payment from -6.8% to 56.64%, while Sheba's growth increased from 12.5% to 138.49%. REB's VAT payment growth was sharper. It increased from -25% to 483.33%. On the opposite hand, British American Tobacco Bangladesh, the very best VAT payer in Bangladesh, had a VAT growth of 13.99% in 2007-2008. Their VAT growth was 19.34% in 2006-2007. it's also mentionable that Grameen had a VAT growth of 185.51% in 2005-2006, while the expansion reduced to -6.80% in 2006-2007.

Table 3: Annual tax rate of growth for top 10 corporate taxpayers

Company name - Change in tax payment - Growth 2007-2008 - 2006-2007 - 2005-2006 - 2007-2008 - 2006-2007

Grameen Phone 239.84% 357.14% 366.67% -32.84% -2.60%

Standard Chartered Bank 17.02% 118.60% 109.76% -85.65% 8.06%

Chevron Bangladesh Blocks 13 and 14 Ltd 122.22% 636.36% - -80.79% -

Islami Bank Bangladesh Ltd 59.41% 55.38% 3150.00% 7.26% -98.24%

Titas Gas (T&D) Company Ltd 40.21% 38.57% - 4.24% -

HSBC 51.28% 85.71% 950.00% -40.17% -90.98%

Southeast Bank Ltd 79.59% 345.45% 120.00% -76.96% 187.88%

Pubali Bank Ltd 77.27% - - - -

Citi Bank NA 46.15% 85.71% 100.00% -46.15% -14.29%

Prime Bank Ltd 42.55% 80.77% - -47.32% -

Total 80.23% 135.69% 408.87% -40.87% -66.81%

Table 4: Annual VAT rate of growth for the top 10 VAT payers

Company name - Change in VAT payment - Growth 2007-2008 - 2006-2007 - 2005-2006 - 2007-2008 - 2006-2007

British American Tobacco 13.99% 19.34% 12.26% -27.67% 57.76%

Grameen Phone 56.64% -6.80% 185.51% -932.76% -103.67%

Dhaka Tobacco 14.67% 6.96% 35.11% 110.70% -80.16%

Titas Gas Field -8.50% 1.95% 3.80% -535.25% -48.62%

Sheba Telecom 138.49% 12.50% - 1007.94% -

Hobigonj Gas Field -5.87% -3.52% -6.23% 66.98% -43.54%

AKTEL 16.88% -27.74% 198.18% -160.83% -114.00%

Kailashtila Gas Field 23.27% 60.61% -10.00% -61.60% -706.06%

Rural Electrification Board 483.33% -25.00% - -2033.33% -

Rashidpur Gas Field -19.20% -9.42% -18.82% 103.82% -49.95%

Total 21.49% 6.13% 33.15% 250.73% -81.52%

It is very alarming that the expansion rate for both corporate tax and VAT for many of the top ten firms is negative in both 2006-2007 and 2007-2008. Hence the extra tax payment doesn't indicate the positive economic process for the country.

The government of the Peoples Republic of Bangladesh must be more calculative about the economic process of the country and concentrate find the explanations which might cause the declining economic process within the country.

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