Grameen Bank has sought tax exemption facility on its income for next four years, aiming to provide more credit to the poor, official sources said.

“Banking Division is now examining the tax exemption proposal of Grameen Bank” a senior Banking Division official said.

He said the division will also review a previous proposal of Grameen Bank on the same issue, which earlier was rejected by the government.

Grameen Bank Chairman Khondaker Muzammel Huq sent a letter to finance minister AMA Muhith last week seeking exemption of all types of taxes of the bank for four years from 2012 to 2015.

The proposal said the bank has been doing NGO-based works and for the development of the poor women. So, the bank should be exempted from tax net of the National Board of Revenue, said the proposal.

Earlier, the government had rejected a Grameen proposal on tax exemption for the years 2011 and 2012 in February last year due to an allegation that the bank operates business with the money gained through tax exemption facility.

Finance minister then said to media that the Grameen Bank should pay at least a small amount of money as tax to the national exchequer. It’s not necessarily that Grameen would have to pay 42.5 per cent corporate tax, he added in response to a tax exemption proposal submitted by former Grameen Bank Managing Director Prof Muhammad Yunus last year.

Nobel laureate Dr Yunus was unceremoniously relieved of his duties at Grameen Bank on March 2, 2011 through a Bangladesh Bank letter.

Grameen has been enjoying tax benefits for last 22 years since its inception in 1983. The facility of Grameen expired on December 31, 2010.

It last extended the tax exemption facility during the tenure of immediate past caretaker government.

Banking Division source said the tax exemption facility is contradictory to the existing income tax rules. The bank has other kind of business apart from micro-finance; so its income should be taxable, sources said.

Usually, all the commercial banks pay 42.5 per cent tax on their annual income.

An NBR study found that total tax exemption eats up about 2.5 per cent of the country’s GDP.

Grameen Bank earned Tk 7.43 billion in 2009, out of which, income against micro credit was Tk 2.73 billion, interest earned from fixed deposit Tk 3.95 billion, mutual fund Tk 1 million and other income Tk 789.8 million.

As per existing income tax rule, earning from the mutual fund is not taxable but other incomes are taxable.

About 63 percent of total income of Grameen Bank comes from micro-credit, sources said.

The Daily Sun/Bangladesh/ 24th Jan 2012