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BUDGET PROPOSAL FOR 2004-05

Insurers demand income tax cut, 10pc tax rebate on dividend distribution

STAR BUSINESS REPORT
Insurance companies have urged the government to reduce the existing rate of 45 percent corporate income tax on banks, insurance companies and financial institutions.
In a proposal for the next fiscal year's budget, they said the tax rate for general insurance companies should be the same as the rate for other listed companies.
"If the government does this it will have a positive impact on capital market as the companies will be able to earn more profit and give more dividends to shareholders," Bangladesh Insurance Association (BIA) said in the proposal submitted to the government for implementation in the budget for 2004-05.
The BIA said tax rate for banks, insurance companies and financial institutions was increased in 2003 to 45 percent from 40 percent in 2002 whereas the rates for other compa-
nies were decreased gradually.
The insurers also asked the government to reconsider the 10 percent dividend distribution tax imposed on companies through the Finance Bill 2003.
At present, all the publicly traded companies excepting the banks and insurance companies pay income tax at the rate of 30 percent and in case of distributing more than 20 percent dividend they get 10 percent tax rebate.
The BIA also proposed reintroduction of the 10 percent tax rebate for banks and insurance companies in the next budget.
The insurers also urged the government to re-fix the income tax ceiling for life insurance agents who pay five percent tax on above Tk 40,000 income. They said the rate should be the same as that of individual assessors, which is currently Tk 90,000.
The BIA demanded cancellation
of the penalty provision for listed insurance companies declaring less than 10 percent dividend. According to the provision, the tax rate for such companies rises to 37.5 percent from 30 percent.
It also requested the government to liberalise investment opportunities for the insurance companies. Currently, they can only invest in the government securities, which actually limits their investment scopes.
"The move will encourage the insurance companies to invest in other sectors and ultimately it will help generate employment," Syed Zahrul Huq, executive committee member of BIA, told The Daily Star.
The BIA proposed fixing a percentage of the investable amount that an insurance company can invest in the government securities.