Leasing firms want tax rebate similar to banks
Star Business Report
Lease financing institutions have demanded two percent tax rebate facility similar to banks arguing that banks enjoy such facility in provisioning their bad debts although the banks and leasing companies are engaged in similar type of business. "There should not be any discrimination between banks and leasing companies with respect to bad debt provisioning as they are engaged in similar kind of business," A Quadir Choudhury, chairman of Bangladesh Leasing & Finance Companies Association, (BLFCA) told The Daily Star yesterday. Such discrimination has put leasing financing institutions in a very disadvantageous position, which is acting as a deterrent to healthy growth of this sector, he said. While the banks are allowed to pay their taxes after deduction of two percent of their provision amount against bad and doubtful loans the leasing companies are not allowed any such facility, which compels them to pay more taxes. The cost of fund for leasing companies is also higher than banks as most of the leasing companies borrow fund from banks while banks can operate with funds from depositors. Both the banks and the leasing companies are regulated by the central bank. Some banks are also engaged in leasing business although they are regulated under the Bank Company Act. The BLFCA chairman said the finance minister has proposed 15 percent value added tax (VAT) on service charges of the leasing companies, which is same as banks. "We have no problem with the decision… rather we are happy that the finance minister treated us similar to banks," he added. Choudhury said to develop a bond market, the government should provide same incentive facilities like shares and debentures to both the companies and individuals. "The interest on bond should be fully exempted from tax like dividend," he added. He also requested the central bank to include leasing companies in the recently introduced small enterprise refinancing scheme saying they are playing a pivotal role in catering financial needs of the small and medium enterprises. According to the BLFCA chairman, leasing and financial institutions disbursed Tk 1,500 crore in different sectors with 95 percent recovery rate last year. The sectors, where the leasing companies are financing include transport, power and gas distribution, diversification of the existing industry, information technology, medical and diagnostic equipment, construction equipment, air-conditioning plants and equipment, packaging industry, agro-based industry and consumer durables.
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