Express (August 1, 2011)
The limit of the government's short-term borrowing from the central bank has been raised to double the earlier one -- from Tk 10 billion to Tk 20 billion now -- for avoiding any mismatch in cash management by the government.
The extended limit was put into effect from July 1, the first day of the new fiscal year (FY) 2011-12, officials said Sunday.
The decision has been taken at a meeting of the cash and debt management committee (CDMC) with Finance Secretary Mohammad Tareque in the chair.
Under the changed rules, the government will be able to borrow up to a maximum amount of Tk 20 billion from the central bank of Bangladesh without issuing any securities.
Earlier, the government could borrow Tk 10 billion at the maximum as short-term loan from the Bangladesh Bank (BB) under the head -- ways and means advances (WMAs) -- to meet its day-to-day expenditures.
"We've doubled the ceiling of WMA to mange the government's cash management properly," a senior government official, who is familiar with public borrowings from the banking sector, told the FE.
He also said the high-powered CDMC has taken the latest decision, against the backdrop of difference between receipts and payments of the government that had exceeded Tk 20 billion in several working days in FY11.
"We expect the new limit of WMAs will help to mitigate the problem of mismatch in day-to-day transactions of the government," the official said, adding that the central bank is already maintaining the new ceiling of WMAs.
"The new limit of WMAs has been set, considering the size of budget as well as the country's growing economic activities," he said, adding that the new WMA ceiling will help to decrease the government's overdraft (OD) drawing from the central bank to meet its regular expenditure.
The government has projected its aggregate borrowings from the country's commercial banks and financial institutions through issuing of T-bills and bonds at Taka 189.57 billion in FY12.
However, the government will continue to maintain its long-term debt management strategy for FY12, aiming to speed up its development activities across the country.
As part of the strategy, the government has decided to borrow Tk 178.78 billion from the banking system by issuing bonds, while Tk 10.79 billion will be borrowed through auctions of three categories of treasury bills (T-bills).
Currently, three T-bills are being transacted through auctions to adjust the government's borrowings from the banking system.
The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, four government bonds -- five-year, 10-year, 15-year and 20-year -- are being traded in the markets.
Tuesday, August 2
US debt crisis likely to leave adverse impact on BD economy
Express (August 1, 2011)
The deepening concerns stemming from the US debt crisis are expected to have an adverse impact on the Bangladesh's economy, especially on its foreign exchange (forex) reserves, the country's economists said.
Fears are rising in the country's apparel industry about the possibility of the world's largest economy defaulting on repayment of its debt as the US politicians still remain split over how to raise the borrowing limit, with the August 2 deadline just one day away.
Such a default may lead to a hike in lending rate in the USA and a demand contraction, arising out of a decline of purchasing capacity of the US consumers, the RMG exporters said.
The world is paying a close attention to whether the US can reach a deal, before the deadline.
Economists said the failure to resolve the problem could send shockwaves across the globe, threatening the plunge of the US dollar, freezing investor sentiment and prompting yet another worldwide economic recession.
Dr Zaidi Sattar, Chairman of Policy Research Institute, one of the country's leading think-tanks, said: "Around 70 per cent of Bangladesh's foreign exchange reserve are invested in the US treasury bonds. So if the crisis over the US debt-ceiling lingers on -- without a decision by the US Congress by the deadline, we will have reasons to be worried over."
He said the worsening impact will particularly be felt if the rate of interest rises as a result of any failure to reach a deal in time.
Economists said a plunge in the U.S. dollar which will undercut the country's overall export price competitiveness.
General Secretary of Bangladesh Economic Association (BEA) Mr. Toufic Ahmed Chowdhury said the issue of most concern is about the intensification of the overall volatility in the foreign currency markets, in the event of the US's failure to raise its debt ceiling.
He said: "Excessive financial market volatility could exacerbate Bangladesh's major export products."
Inflationary pressures on the US economy will lead to low prices for garment items, Mr. Toufic feared.
Professor Abu Ahmed of Dhaka University said: "Our forex reserves are mostly in US dollars and the real value of dollars will plunge if the US cannot reach a deal.
The country's balance of payment (BoP) situation which is already under some pressure might face another blow following any unwelcome development over the US debt ceiling, he stated.
Anwar-ul-Alam Chowdhury Parvez, a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) told the FE: "Demand for RMG items will drop, if the crisis lingers."
Bangladesh exports apparel items worth over $5.0 billion, nearly 25 per cent of the country's total exports, to the USA.
Mr Parvez said the government should take cautionary steps to help avert any possible adverse impact of the still-unfolding situation.
The central bank should have diversified much earlier its reserve portfolio, according to, at least, two other professional economists who preferred anonymity.
The Bangladesh Bank should have taken steps, at least several months earlier about reshuffling of its reserve portfolio, they noted.
They pointed out that China, India and other economies had partly deployed their reserves in purchases of gold and holding of other currencies much earlier.
The deepening concerns stemming from the US debt crisis are expected to have an adverse impact on the Bangladesh's economy, especially on its foreign exchange (forex) reserves, the country's economists said.
Fears are rising in the country's apparel industry about the possibility of the world's largest economy defaulting on repayment of its debt as the US politicians still remain split over how to raise the borrowing limit, with the August 2 deadline just one day away.
Such a default may lead to a hike in lending rate in the USA and a demand contraction, arising out of a decline of purchasing capacity of the US consumers, the RMG exporters said.
The world is paying a close attention to whether the US can reach a deal, before the deadline.
Economists said the failure to resolve the problem could send shockwaves across the globe, threatening the plunge of the US dollar, freezing investor sentiment and prompting yet another worldwide economic recession.
Dr Zaidi Sattar, Chairman of Policy Research Institute, one of the country's leading think-tanks, said: "Around 70 per cent of Bangladesh's foreign exchange reserve are invested in the US treasury bonds. So if the crisis over the US debt-ceiling lingers on -- without a decision by the US Congress by the deadline, we will have reasons to be worried over."
He said the worsening impact will particularly be felt if the rate of interest rises as a result of any failure to reach a deal in time.
Economists said a plunge in the U.S. dollar which will undercut the country's overall export price competitiveness.
General Secretary of Bangladesh Economic Association (BEA) Mr. Toufic Ahmed Chowdhury said the issue of most concern is about the intensification of the overall volatility in the foreign currency markets, in the event of the US's failure to raise its debt ceiling.
He said: "Excessive financial market volatility could exacerbate Bangladesh's major export products."
Inflationary pressures on the US economy will lead to low prices for garment items, Mr. Toufic feared.
Professor Abu Ahmed of Dhaka University said: "Our forex reserves are mostly in US dollars and the real value of dollars will plunge if the US cannot reach a deal.
The country's balance of payment (BoP) situation which is already under some pressure might face another blow following any unwelcome development over the US debt ceiling, he stated.
Anwar-ul-Alam Chowdhury Parvez, a former president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA) told the FE: "Demand for RMG items will drop, if the crisis lingers."
Bangladesh exports apparel items worth over $5.0 billion, nearly 25 per cent of the country's total exports, to the USA.
Mr Parvez said the government should take cautionary steps to help avert any possible adverse impact of the still-unfolding situation.
The central bank should have diversified much earlier its reserve portfolio, according to, at least, two other professional economists who preferred anonymity.
The Bangladesh Bank should have taken steps, at least several months earlier about reshuffling of its reserve portfolio, they noted.
They pointed out that China, India and other economies had partly deployed their reserves in purchases of gold and holding of other currencies much earlier.
Taxpayers showing 20pc higher income can avoid scrutiny
Express (August 1, 2011)
The National Board of Revenue (NBR) has introduced a new rule exempting taxpayers, both corporate and individual, from scrutiny of the taxmen provided they (taxpayers) show in their returns, at least, 20 per cent higher income than that of the previous year.
The board made the rule effective from July 1, especially for the tax returns filed under universal self-assessment method, to remove fear among the taxpayers relating to use of discretionary power of the taxmen.
The revenue board, introduced the rule for the first time, to encourage income taxpayers file their tax returns without being panicked by taxmen's scrutiny.
For corporate taxpayers, the new income tax rule restricts transfer of initial capital within five years. If any taxpayer transfers the capital within the stipulated time, the amount of the particular year thus transferred will be considered as income from other sources of the taxpayers.
Under the existing rule, a taxpayer can stay away from audit of the taxmen by showing an initial capital four times higher than the income shown in the tax files in the previous year.
The new rule empowered the taxmen to audit four categories of tax files despite showing 20 per cent higher income in the returns, according to the rules incorporated in the income tax law for 2011-12 fiscal year.
Taxmen will audit the tax returns if any taxpayer shows tax exempted income in his or her tax file which he or she is not entitled to enjoy under the tax law.
Taxpayers will also have to face the audit procedures if they show wealth as gifts in the tax returns. Universal self-assessment tax files will be audited if taxpayers show loans in the files taken through non-banking channel.
Taxmen will also audit tax files if they see mismatch between increase of wealth and family expenditure in the tax file.
"We have tagged the conditions to check abuse of the new opportunity for universal taxpayers," said a senior tax official.
There is possibility of abusing the facilities by showing large amount of income in the tax files from the sectors that enjoy tax-exemption like poultry, fisheries and others, he said.
The NBR in 2008-09 introduced the new rules of universal self-assessment to minimise discretionary power of the taxmen.
Taxmen are not empowered to scrutinise the tax files filed under the method without having any specific ground. Field offices have to obtain prior permission of the top tax officials to check or audit the tax files.
A C Nath, FCA and former president of ICAB (The Institute of Chartered Accountants of Bangladesh), welcomed the new rule saying that it will help the taxpayers file tax returns without hassle.
Usually, a number of taxpayers have to pay higher tax after auditing and assessment, he said.
They will have to bear additional cost in tribunal and court to resolve disputes on fixation of tax, he added.
Revenues worth billions of taka of the government have remained stuck up with the pending cases, he added.
Officials said the universal self-assessment method has gained huge popularity among the taxpayers. Around 90 per cent of the income taxpayers file tax returns under the method.
The National Board of Revenue (NBR) has introduced a new rule exempting taxpayers, both corporate and individual, from scrutiny of the taxmen provided they (taxpayers) show in their returns, at least, 20 per cent higher income than that of the previous year.
The board made the rule effective from July 1, especially for the tax returns filed under universal self-assessment method, to remove fear among the taxpayers relating to use of discretionary power of the taxmen.
The revenue board, introduced the rule for the first time, to encourage income taxpayers file their tax returns without being panicked by taxmen's scrutiny.
For corporate taxpayers, the new income tax rule restricts transfer of initial capital within five years. If any taxpayer transfers the capital within the stipulated time, the amount of the particular year thus transferred will be considered as income from other sources of the taxpayers.
Under the existing rule, a taxpayer can stay away from audit of the taxmen by showing an initial capital four times higher than the income shown in the tax files in the previous year.
The new rule empowered the taxmen to audit four categories of tax files despite showing 20 per cent higher income in the returns, according to the rules incorporated in the income tax law for 2011-12 fiscal year.
Taxmen will audit the tax returns if any taxpayer shows tax exempted income in his or her tax file which he or she is not entitled to enjoy under the tax law.
Taxpayers will also have to face the audit procedures if they show wealth as gifts in the tax returns. Universal self-assessment tax files will be audited if taxpayers show loans in the files taken through non-banking channel.
Taxmen will also audit tax files if they see mismatch between increase of wealth and family expenditure in the tax file.
"We have tagged the conditions to check abuse of the new opportunity for universal taxpayers," said a senior tax official.
There is possibility of abusing the facilities by showing large amount of income in the tax files from the sectors that enjoy tax-exemption like poultry, fisheries and others, he said.
The NBR in 2008-09 introduced the new rules of universal self-assessment to minimise discretionary power of the taxmen.
Taxmen are not empowered to scrutinise the tax files filed under the method without having any specific ground. Field offices have to obtain prior permission of the top tax officials to check or audit the tax files.
A C Nath, FCA and former president of ICAB (The Institute of Chartered Accountants of Bangladesh), welcomed the new rule saying that it will help the taxpayers file tax returns without hassle.
Usually, a number of taxpayers have to pay higher tax after auditing and assessment, he said.
They will have to bear additional cost in tribunal and court to resolve disputes on fixation of tax, he added.
Revenues worth billions of taka of the government have remained stuck up with the pending cases, he added.
Officials said the universal self-assessment method has gained huge popularity among the taxpayers. Around 90 per cent of the income taxpayers file tax returns under the method.
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