FBCCI calls for lending rate cut in sync with fiscal benefits

FT ONLINE

The local top trade body on Saturday called for bringing the lending rate down to a single digit by harnessing fiscal benefits announced in the budget for the next fiscal.

On Thursday, Finance Minister AMA Muhith presented a Tk 4.63 trillion budget for fiscal year (FY) 2018-2019.

The budget cut the corporate tax for banks, insurance and financial institutions by 2.5 per cent.

The Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) sought "quick" and "effective" steps to make sure the financial institutions (FIs) deliver in exchange for these benefits.

The chamber also sought 'exemplary' punishment to those involved in misappropriating bank loans.

It attached importance to timely and quality execution of the Annual Development Programme (ADP) alongside reforming the revenue board to meet a higher revenue target.

Speaking at a post-budget press conference held in Dhaka, FBCCI President Shafiul Islam Mohiuddin said the government proposed reducing the corporate tax for banks and FIs.

The banks got some other benefits like cut in Cash Reserve Requirement (CRR) and the limit of Advance Deposit Ratio (ADR), he added.

"We hope such benefits in the banking sector would help slash the interest rate to a single-digit," he said.

Mr. Mohiuddin sought an effective role of the Ministry of Finance and the Bangladesh Bank in making sure the FIs deliver in exchange for such special benefits.

He also sought the same fiscal measure for both listed and non-listed companies in the productive sector.

He termed the recent spate of 'bank robbery' a serious constraint on investment and industrialisation.

He said the criminals should be brought to book for committing such financial crimes.

"We want strict and exemplary punishment to people involved in such bank robbery," the FBCCI chief said.

About the proposed banking commission, he said the chamber welcomes such a move but the watchdog needs to function effectively.

"We don't want to see money of the depositors looted by someone…," he added.

He said the private sector has the capability to provide more capital than that targeted in the proposed budget.

For that, all barriers to capital formation need to be removed.

"Capital market and banks meet the financial requirements of the private sector," he said.

"But the high rate of interest discourages the private sector. We want a conducive capital climate," he added.

Mr Mohiuddin also laid emphasis on timely and quality execution of ADP to encourage both local and overseas investments.

He also stressed the need for quick construction of economic zones alongside mega infrastructural projects to attract investors on a large scale.

The FBCCI president opposed the proposed increase in corporate tax in the apparel industry.

He said the cost of production in the sector rose by 18 per cent over the last two years for various reasons, including the compliance issue.

"The proposal will undoubtedly hinder the growth of the sector. It should be withdrawn," he added.

The federation expressed its dissatisfaction over the continuation of the tax-free threshold for individual income.

The limit remains the same, though the inflation rate and living expenses have increased, it said.

It suggested raising the limit to Tk 0.3 million (3.0 lakh) from the existing Tk 0.25 million.

The FBCCI suggested keeping the apps-based ridesharing services out of the VAT net until alternative transportation arrangements like elevated expressway and metro rail are introduced.

The government imposed VAT at the rate of 5.0 per cent on ridesharing services.

The trade body also recommended withdrawal of AIT (advance income tax) at the rate of 5.0 per cent on industrial raw materials.

This contradicts the existing tax policy, it said.

The apex chamber, however, hailed various provisions in the budget proposals, including re-imposition of 28 per cent tax on rice import.

FBCCI senior vice president Sheikh Fazle Fahim, vice president Md. Muntakim Ashraf and other senior leaders were also present at the press conference.