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Sunday, May 24, 2009

NBFIs demand tax cut

The Daily star : NBFIs demand tax cut

Leasing and finance companies demanded yesterday a lower tax rate for them than what is being charged in case of banks.The tax rate for banks and non-bank financial institutions (NBFIs) is same at 45 percent.“It's not practical to keep the banks and NBFIs within the same tax bracket since a major part of revenues of a bank comes from fee-based earnings,” Mafizuddin Sarker, president of Bangladesh Leasing and Finance Companies Association (BLFCA), told a press conference at Sheraton Hotel.

Sarker said banks earn a huge amount from L/Cs (letter of credit), guarantees, remittances and foreign currency exchange, which the NBFIs cannot.“We believe the tax rate for NBFIs should be 5 percent lower than that of the banks,” he told The Daily Star by phone.The association placed an eight-point demand before the government for considering those in the upcoming budget for fiscal 2009-10.

The demands also include allowing depreciation allowance, reduction of tax on dividend income, admissibility of provision for doubtful debt, reduced tax rate for housing finance operation, tax deduction at source and tax exemption for zero coupon bonds.Leasing and finance companies are demanding a less tax rate for them arguing that their cost of fund is significantly higher than the banks'.

The lending rate of the NBFIs is 1.5-2.0 percent higher than the banks as they mobilise fund mainly from the banks for lending their clients. Banks lend them at least at 14 percent.“Moreover, the banks can take short-term deposit at a cheaper rate, which leasing companies cannot because of regulatory restrictions,” the BLFCA president said.

In its budget proposals, already forwarded to the finance ministry, the association demanded that corporate tax should be fixed at 30 percent for publicly listed and 37.5 percent for non-listed financial institutions.At present, both the listed and non-listed NBFIs have to pay 45 percent corporate tax.

The association requested the finance minister to allow depreciation allowance to leasing operation for stimulating investment in capital machinery in the country. The government withdrew the facility in fiscal 2007-08.They also demanded the tax on dividend at 15 percent from 20 percent.Other office bearers of BLFCA were present at the press conference.



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