FE Report (January 23, 2011)
Bangladesh Leasing and Finance Companies Association (BLFCA) has demanded of the government to exempt the financial institutions (FIs) from double taxation in case of booking income by the parent FIs from subsidiary.
"Effective tax liability for the parent company would be 50 per cent against the current rate of 42.5 per cent under a directive of the Securities and Exchange Commission (SEC) on establishing separate subsidiary for stock trading by banks and FIs," BLFCA chairman Mafizuddin Sarker told the FE Saturday.
Currently FIs have been paying 42.5 per cent income tax on its taxable income and upon opening of a subsidiary, income tax payable would be 37.5% on the taxable income of the subsidiary company and the parent company would book the dividend income in its books.
However 20 per cent tax on dividend is required to be imposed on the dividend income to be received by the parent company under the prevailing regulation.
"This is certainly not an encouraging factor to go for opening of subsidiary which was aimed at expanding the businesses of our companies," the BLFCA chief said.
Making a plea for avoiding payment of income tax twice on the same income by the parent company and subsidiary company, the BLFCA chief cited example of India.
"India handled the matter by inserting a special provision in the Finance Act of 2009," he added.
In another demand, the BLFCA said in order to reduce the dependency on bank borrowing, FIs should be more focused to attract deposit from public in a three-month plus tenor.
Currently FIs can take deposit from institutions and individual with a tenure of not less than 6 months.
Many FIs have short term product as well like factoring, credit card, treasury operations etc.
The BLFCA also demanded that the 'existing exemption on the cumulative exposure in the form of underwriting and portfolio loan of a merchant banker at any time should not exceed five times of its equity' should be applicable in case of subsidiary of FIs as well.
Asad Khan, vice chairman of BLFCA said the net investment of FIs stood at Tk 53.62 billion in 2009.
"The figure is the testimony to our significant contribution to the economic development of the country," Mr Khan added.
"Effective tax liability for the parent company would be 50 per cent against the current rate of 42.5 per cent under a directive of the Securities and Exchange Commission (SEC) on establishing separate subsidiary for stock trading by banks and FIs," BLFCA chairman Mafizuddin Sarker told the FE Saturday.
Currently FIs have been paying 42.5 per cent income tax on its taxable income and upon opening of a subsidiary, income tax payable would be 37.5% on the taxable income of the subsidiary company and the parent company would book the dividend income in its books.
However 20 per cent tax on dividend is required to be imposed on the dividend income to be received by the parent company under the prevailing regulation.
"This is certainly not an encouraging factor to go for opening of subsidiary which was aimed at expanding the businesses of our companies," the BLFCA chief said.
Making a plea for avoiding payment of income tax twice on the same income by the parent company and subsidiary company, the BLFCA chief cited example of India.
"India handled the matter by inserting a special provision in the Finance Act of 2009," he added.
In another demand, the BLFCA said in order to reduce the dependency on bank borrowing, FIs should be more focused to attract deposit from public in a three-month plus tenor.
Currently FIs can take deposit from institutions and individual with a tenure of not less than 6 months.
Many FIs have short term product as well like factoring, credit card, treasury operations etc.
The BLFCA also demanded that the 'existing exemption on the cumulative exposure in the form of underwriting and portfolio loan of a merchant banker at any time should not exceed five times of its equity' should be applicable in case of subsidiary of FIs as well.
Asad Khan, vice chairman of BLFCA said the net investment of FIs stood at Tk 53.62 billion in 2009.
"The figure is the testimony to our significant contribution to the economic development of the country," Mr Khan added.
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