Leasing companies demand tax cuts

The Bangladesh Leasing and Finance Companies Association (BLFCA) yesterday demanded cuts in corporate taxes for non-bank financial institutions to help the sector grow and contribute to increased economic activities.

A delegation, led by BLFCA Chairman Anis A Khan, met Finance Minister AMA Muhith at his ministry.

BLFCA, the representative body of non-bank financial institutions (FIs), demanded that the government lower the tax rate for FIs from 45 percent, a rate that also applies to banks.

"It was not practical to keep the banks and financial institutions in the same tax bracket, since a major part of the revenue of a bank comes from fee-based earnings such as L/C commission, commission on guarantees, remittances, substantial exchange income, which a financial institution cannot earn," BLFCA said in a statement.

Moreover, the cost of funds for a bank is much lower than non-bank financial institutions, according to BLFCA.

The authorities must set a lower rate for non-bank financial institutions than banks, it demanded.

"Financial institutions in our country play an important role in mobilising and channeling resources. These institutions comprise leasing companies, investment and finance companies, house finance companies," BLFCA said.

The leasing sector, a vital segment of the financial sector, has contributed significantly over the years, despite a string of setbacks, it said.

"It plays a catalytic role in providing alternate sources of finance to the private sector. The leasing industry is facing tremendous competition, challenges and regulatory changes, which affects adversely on the business," BLFCA said.

The association also demanded reinstatement of depreciation allowance to the industry saying that otherwise it would increase the tax burden. The government withdrew depreciation allowance for the leasing companies in 2007-08. The industry had been enjoying the allowance since 1985.

Depreciation allowance means, in all leasing transactions the owner of the asset is entitled to a depreciation allowance on machinery, plant, vehicle or furniture given to a lessee.

The finance minister said the ministry would examine the issue.