Even though there was a negative reaction on social media about Grameen Bank's income tax free benefits, like Grameen Bank, more than 700 microfinance institutions including BRAC, Asha, TMSS never had to pay income tax. Not only that, Grameen Bank established through the Grameen Bank Ordinance, 1983 was also enjoying income tax exemption from its inception till December 31, 2020. However, Grameen Bank was deprived of this facility from January 1, 2021 under the wrath of outgoing Prime Minister Sheikh Hasina. It is known that at that time, Grameen Bank applied to the government for tax exemption, but it was not agreed.
The founder of Grameen Bank. After the new government led by Muhammad Yunus came to power, all the income of the institution was declared tax free. According to the new decision, this institution, which distributes loans to the poor people of the country, will enjoy income tax-free benefits till December 2029.
721 companies get income tax free benefit
According to the Microfinance Regulatory Authority (MRA), there are 721 registered microfinance institutions in the country. All are private sector or private institutions. More than 700 credit disbursing institutions certified by the Microcredit Regulatory Authority do not have to apply to NBR. By virtue of the Finance Act, these institutions enjoy income tax-free benefits. As of September 19 of this year, the number of credit disbursing institutions certified by the Microcredit Regulatory Authority is 721.
Like every year, the Finance Act has given income tax exemption to these institutions. According to the Income Tax Ordinance, 1984, any service charge arising out of microcredit activities of an entity registered by the Microcredit Regulatory Authority is exempt from tax.
That is why Grameen Bank has to apply
Microfinance institutions in Bangladesh do not have to pay income tax. The law provides for income tax exemption for institutions registered under the Microcredit Regulatory Authority.
But Grameen Bank is not in the list of 721 institutions certified by the Microcredit Regulatory Authority. That exemption does not apply to Grameen Bank as it is governed by a separate law. That is why Grameen Bank has to apply to extend the period at the end of the period. Even though Grameen Bank has not obtained the certificate of Microcredit Regulatory Authority, the institution distributes microcredit like BRAC, ASHA, TMSS. But in 2021, this company has been unfairly deprived of income tax free benefits.
Since its inception, Grameen Bank was enjoying tax exemption. Even when the government passed a law in 2013 repealing the Grameen Bank Ordinance-1983, this facility was retained. But on January 1, 2021, that facility was removed by the then government.
In this context, Chairman of the National Board of Revenue, Abdur Rahman Khan said, all those who work with microcredits get income tax free benefits. Since Grameen Bank was excluded, we fixed it now in the same formula. He said that although they are banks called Grameen Bank, they actually do micro-credit operations. In our law, there is tax exemption for those who work with microcredit.
Since its inception in 1983, NBR had been renewing the income tax exemption period by issuing notifications every three years on the application of Grameen Bank.
It should be noted that the microcredit disbursing institutions lend money to poor people without collateral. Generally, micro-loans are given from Tk 2,000 to 12 lakhs, so that they can create investment-oriented assets with micro-loans. Microcredit system is initiated to improve the quality of life of people who do not have assets to provide collateral and also do not have the opportunity to take loans from the conventional banking system. After independence, the microcredit distribution program started in this country institutionally in the private sector in the 1970s. Big microcredit disbursing institutions like Grameen Bank are now giving loans to poor people in remote areas of the country. Grameen Bank is a public authority governed by law. It started in 1976 through a research project by Professor Muhammad Yunus of Chittagong University, which was conducted to plan a credit delivery system to provide banking services to the rural poor. Dr. Grameen Bank was established with the aim of poverty alleviation through micro credit in the initiative of Yunus in partnership with the government. Grameen Bank and Dr. for this work in 2006. Yunus also won the Nobel Prize. At present Grameen Bank has 1 crore 3 lakh 60 thousand members. Out of this, 71 lakh 60 thousand borrower members have taken a loan of Tk 24 thousand 757 crore. Apart from this, the loan status of the members of the bank is 16 thousand 150 crores and savings status is 22 thousand 682 crores.
Garimsi started from 2015
NBR's efforts to increase Grameen Bank's tax-free benefits started in 2015. That year, Grameen Bank's application languished in the NBR for a long time without a decision. Grameen Bank then sought income tax exemption for five years from 2016 to 2020. Grameen Bank also wrote a letter to the then Finance Minister Abul Mal Abdul Muhith as NBR did not report anything even after six months.
In May 2016, Grameen Bank's income tax exemption was extended till December 31, 2020 in a notification signed by then NBR Chairman Najibur Rahman.
But after that deadline passed, the then government did not respond to Grameen Bank's application. Professor Yunus, chief advisor to the interim government, was the managing director of the bank from the beginning.
Bangladesh is known all over the world as a pioneer country for the successful implementation of microcredit system. Institutions like Grameen Bank, BRAC are being appreciated at home and abroad. Dr. in 2006 to contribute to social development through microcredit. Muhammad Yunus received the Nobel Prize. When Professor Yunus won the Nobel Peace Prize in recognition of his efforts to alleviate poverty through microcredit, Grameen Bank also won the same prize.
This bank, which works on microcredit and poverty alleviation, got this facility again two months after the interim government led by Professor Yunus took over after the tension with the previous Awami League government.
After the company was exempted from tax until 2029, various discussions and criticisms started on social media.
NBR explained
In an explanation sent to the media on Monday (October 14), NBR said, from the inception of Grameen Bank established through the Grameen Bank Ordinance, 1983 to 31 December 2010, eight orders or notifications issued by the Department of Banks and Financial Institutions (Policy), Ministry of Finance By way of exemption from income tax, supertax or business profits tax leviable on any income of that establishment.
Besides, Grameen Bank, established through the Grameen Bank Act, 2013, is not a scheduled bank and the institution mainly conducts microcredit activities. Grameen Bank was not getting the same tax exemption as per the Income Tax Act, 2023, despite being a homogeneous service i.e. microcredit, only because it was not registered by the Microcredit Regulatory Authority. In order to provide similar tax exemption benefits to Grameen Bank as all other microcredit institutions, under Income Tax Ordinance from 1st January 2011 to 31st December 2015 and from 1st January 2016 to 31st December 2020, that institution was given tax exemption. As Grameen Bank does not get similar tax exemption benefits like other institutions operating homogeneous microcredit activities, under the Income Tax Act, all income earned by Grameen Bank from October 9, 2024 to December 31, 2029 has been conditionally exempted from tax under the Income Tax Act.
Earlier, on October 10, NBR Chairman Md. The notification signed by Abdur Rahman Khan offered tax-free benefits on the condition of filing regular income tax returns.
Analysts say that the government provides tax benefits to various organizations according to the law at various times to sustain the competitive market with microcredit, social and developmental work or foreign companies. The government has been giving Grameen Bank tax exemption from the beginning.
In this context, former chairman of NBR Mohammad Abdul Majid said, Grameen Bank has the right to get income tax free benefits for many reasons. He said that this institution which distributes loans was created from the beginning for the economic system of the people at the grass root level. Apart from microcredit, Grameen Bank also does some social work like giving education loan, home loan. According to him, since this organization is working for the welfare of the poor and women, it is entitled to receive income tax free benefits.
