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Bracketing leasing cos with banks, insurers 'unjustified'

Increased tax to retard growth of leasing firms: BLFCA

STAR BUSINESS REPORT
Leasing companies' association has strongly opposed imposition of more tax on the financial institutions and said the authorities should not bracket them with the banks and insurance companies when it comes to tax imposition.
"Banks are engaged in different types of business like exports, imports, trading, industrial credit, foreign remittance and so on. But the leasing companies are primarily focused on term lending to limited products and services," A Quadir Choudhury, acting chairman of Bangladesh Leasing and Financing Companies Association (BLFCA), told a press briefing in Dhaka yesterday.
He said banks collect deposits from different sources, some of which are cheap and their actual fund cost is seven to eight per cent on an average. On the other hand,
the leasing companies borrow money from banks and their fund cost is 15 per cent, he added.
"So, in view of the limited source of earnings we strongly feel that it will be totally unjustified to bracket leasing companies with the banks and insurance firms."
The government in the budget for 2003-04 fiscal has proposed 45 per cent tax on bank, insurance and financial institutions against existing 40 per cent.
Choudhury urged the government to re-fix the tax for leasing companies at 40 per cent. The increased tax will hurt the growth of the leasing companies, he added.
The imposition of 10 per cent dividend distribution tax is a blow to the incentive granted earlier to the listed companies, he observed.
Under the earlier incentive, companies got 10 per cent tax rebate for declaring dividend above 20 per cent.
Besides, incentive should be
given for the listed leasing companies to encourage more companies to be listed with the bourses, he added.
Dividend is declared on after tax profits and therefore further payment of distribution tax will amount to double taxation that is likely to stifle the growth of the capital market, Choudhury added.
He said financial institutions should be allowed provision for bad and doubtful debts in line with the banks at the rate of two per cent as proposed in the budget for the next fiscal.
In his budget speech, Finance Minister M Saifur Rahman said: "Increase in the tax gap between listed and non-listed companies is likely encourage more companies to get listed with stock exchanges. I, therefore, propose to recast the corporate tax rate for listed companies to remain unchanged at 30 per cent and non-listed companies to be fixed at 37.5 per cent. Tax rates for
bank, insurance and financial institutions to be fixed at 45 per cent."
The proposed budget did not offer any incentive for the listed leasing companies, leaders of leasing companies said. More leasing companies will prefer to be listed with bourses if there is incentive for the listed companies, they added.
Syed Ehsan Quadir, deputy managing director of Industrial Development Leasing Company of Bangladesh Ltd, Sayyed Husain Jamal, managing director of VANIK Bangladesh Ltd, Mafizuddin Sarker, managing director of International Leasing and Financial Services Ltd, and SM Shamsul Arefin, managing director of Uttara Finance and Investment Ltd, among others, were present at the briefing.
At present, 28 financial institutions are operating in Bangladesh.