Non-banking financial institutions (NBFIs) have welcomed the central bank move of relaxing foreign exchange regulations which would allow them providing term loans in local currency to foreign companies through authorised dealer (AD) banks.

"This is a great step taken by the Bangladesh Bank and it will widen our business further," chairman of Bangladesh Leasing and Finance Companies Association (BLFCA) Asad Khan told the FE Monday.

The new arrangements will help create an opportunity for the NBFIs to invest funds in foreign-owned companies.

"We have long been appealing to the bank regulator to withdraw all restrictions in investing our money in foreign companies," BLFCA chairman said.

So long AD banks were allowed to offer such loans to the foreign-owned companies after complying with the conditions set by the BB.

Asad Khan also said that he is confused regarding the Bangladesh Bank circular whether it is applied to fully-owned or partly-owned companies as NBFIs have already been financing in partly-owned entities since they started business in the country.

Under the conditions, the term loans in Bangladesh Taka (BDT) should not exceed, as percentage of total term borrowings, the percentage of equity of the firms/companies held by Bangladesh nationals and firms/companies, not owned or controlled by foreigners.

Besides, the total debt liabilities of the firms/companies must not also exceed the 50:50 debt equity ratio.

Terming it a good sign, Mofizuddin Sarkar, Managing Director of Bangladesh Finance Investment Company Ltd., said it seems that government wants that foreign companies have more involvement in the country.

Normally the foreign-owned companies do borrow funds in the term loans from external sources, he said, adding that the companies are also allowed to receive such loans in BDT from local banks, subject to compliance with specific regulations.

He said the move will certainly boost NBFIs business and help to come out from liquidity shortage-hit non-bankers.

Currently, 31 NBFIs are operating in Bangladesh.

According to the central bank circular, AD banks are also to ensure that the companies follow all provisions, in line with the existing guidelines for foreign exchange transactions (GFET) for the whole amount of financing.

"As per new rules, if the loan is in foreign exchange then transaction has to be under foreign exchange transaction guidelines," he added.

Financial Express/Bangladesh/ 8th May 2012

The National Board of Revenue (NBR) is going to take strong action soon to collect taxes from the parties involved in the Bangladesh Premier League (BPL) T20 tournament.

The board will set its next course of action in a meeting within this week.

“We have allowed them enough time to pay the taxes. But unfortunately they failed to do so and are seeking more time. We will set our next course of action by this week,” said Kanon Kumar Roy, director general of Directorate of Inspection (Taxes) of NBR in Dhaka yesterday.

“We will take every measure to realise the taxes the government is entitled to and none of the parties involved will get a chance to escape,” said Roy, also head of a NBR team formed to monitor all the BPL financial transactions.

The tax administrator earlier projected to realise over Tk 200 million as taxes from parties involved with the first version of BPL between February 9 and 29 this year. The parties included event management firm Game On Sports, the six franchises, both foreign and local players and the BPL governing council.

However, the NBR so far received only Tk 10 million. The price of all teams played in the tournament was US$ 7 million (Tk 574m).

The concerned parties assured the NBR of paying the taxes by April 30. But they failed to do so and paid only a nominal amount so far. Many of them are also requesting the board to extend the timeline once again.

“Barishal Burners has paid only Tk 1.9 million as taxes in this time while many of them are requesting us to extend the time again,” Kanon Kumar Roy said.

NBR officials said as per the rule, NBR will deduct 25 percent tax against payments to foreign players and 10 percent from those to local cricketers. The revenue board estimated to earn Tk 96.5 million from the foreign players and Tk 19 million from the local players as taxes.

Till date the local players have got only 20-25 per cent of their total payment from the franchises though the foreign players got more.

Meanwhile, on March 30, Bangladesh Cricket Board (BCB) held a meeting with the owners of all participating teams of the tournament to discuss issues related to players’ payment.

In the meeting, the franchise owners gave their commitment to the board that all outstanding payment of overseas players will be cleared by May 9 and the dues of the local cricketers will be settled by 31 May.

The Daily Sun/Bangladesh/ 7th May 2012

The National Board of Revenue (NBR) for the first time is going to honour 20 highest taxpayers with 'tax cards' to recognise their compliance and consistency in paying taxes.

The tax authority has already finalised a list of top taxpayers, including 10 companies, to motivate more people to pay taxes so the government can mobilise more funds domestically for financing its annual budget.

A list of the selected taxpayers has already been sent to a ministerial committee on national award for a final approval, said an official of the NBR.

However, many leading taxpayers, including companies and individuals, could not make foray into the list due to cases pending in courts.

"We want to encourage people to pay more taxes by awarding the tax cards. We will honour those taxpayers who are not loan defaulters or tax defaulters and have no criminal or tax cases pending at courts," said MA Quader Sarker, member in charge of tax administration and monitoring of the NBR.

Prime Minister Sheikh Hasina is expected to hand over the tax cards on May 26 through a programme.

These top taxpayers will enjoy some privileges while making a reservation for seats in state-run airlines, trains and water transports.

They will also be able to use the lounge for commercially important persons (CIP) at the airports.

They along with their family members will easily get cabins at government hospitals. The card holders will also be invited to various government functions.

The NBR initiative comes in line with its efforts to increase revenue through various ways including encouraging existing and prospective taxpayers to pay taxes. In the last four years, the revenue administration has been observing income tax day.

The NBR also started organising tax fairs to encourage people to submit tax returns and get tax identification number (TIN) without hassle. Also, the tax administration began honouring the long-time and highest taxpayers from city corporations and districts.

To give a mental boost to the taxpayers further, the authority framed a policy in 2010 to honour the highest taxpayers by giving them the tax cards with one-year tenure.

In line with the policy, taxpayers, having criminal cases under trial in court, default loans and income tax and value added tax related cases pending in court will not be eligible for the honour.

Chevron Bangladesh Block 12 Ltd, Sylhet Gas Ltd, Citibank NA, American Life Insurance Company, Trust Bank, Security Printing Corporation (Bangladesh), Bangladesh Export Processing Zones Authority, Jamuna Bank, AK Khan & Co, and Bapex Ltd have become the top taxpayers.

In the individual category, a Rangpur-based businessman, Md Motazzaroul Islam, topped all in the tax payment records of the revenue board.

Others include Iqbal Haider Chowdhury, Haji Kauch Mia, MM Amjad Hossain, Md Yusuf, M Haider Hossain, Md Motahar Hossain, Salahuddin Kasem Khan, M Ziauddin Khan and Liala Hossain.

During the last several years, the tax authority has been recording increasing amount of revenue. Total revenue collection rose 27 percent to Tk 79,092 crore during the fiscal 2010-11 from Tk 62,042 crore the previous year.

During the July-March period of the current fiscal year, NBR earnings increased by 18 percent to Tk 62,737 crore from Tk 53,107 crore in the same period a year ago.

The Daily Star/Bangladesh/ 7th May 2012

The Ministry of Finance is preparing to issue a total of $500 million sovereign bond in international market to obtain foreign loans from global markets to ease its foreign fund crisis.

“The ministry has taken all kinds of measures including holding talks with a foreign firm to issue bond in international market”, said a senior official of the Macroeconomic Wing under Finance Ministry.

He also said they were following recommendations of a government policy paper on borrowing credit from international securities market through issuing bond amid fund crisis in the European Union countries like Greece and Spain.

The paper was made by a seven-member technical committee headed by Addition Finance Division Secretary Syed Manjurul Islam, which was formed by the government in January on flotation of sovereign bond in international market. The committee submitted its final report to the government last month.

Now, most of the local companies take credits from the international sources with high interest rates, but a standard should be fixed on interest of foreign credits by private sector, the official said.

Now private firms get foreign loan at 10-12 percent interest rates, which are likely to come down to 7 percent after floating sovereign bond by the government.

Sources in macroeconomic wing further said members of the technical committee have already talked to different sovereign bond solution firms to appoint for the country.

As part of the move, Chairman of the body Syed Manjurul Islam talked with a director of Singapore-based Sovereign Solution Limited last week. The firm also works for the Bangladesh chapter of Standard Chartered Bank.

Regarding floating of the bond, Bangladesh Bank Governor Dr Atiur Rahman told daily sun last week that international credit rating firms would start working from next month to assign their ratings to Bangladesh.

After getting new ratings, the government will float sovereign bond in the international market, he added.

Stable monetary and fiscal management of Bangladesh earned Ba3 (Moody’s) and BB-(S&P) sovereign ratings with stable outlook for two consecutive years of 2010 and 2011.

According to a policy paper, to attain foreign loan through sovereign bond, the foreign loans to be borrowed under the proposed sovereign bond must not be spent on financing the regular budget deficit of the government, but on large infrastructure projects that offer scopes for revenue earnings.

It also said ensuring the maximum utilisation of the fund, collected through the bond, would be a daunting challenge for the government.

Because, strict conditions and intensive monitoring of the loan issuing authorities, particularly the development partners in case of projects under concessional loan, will not be in place for the projects, to be implemented with fund borrowed through sovereign bond.

The paper strongly suggested finalisation of the projects before issuing sovereign bond in the international market to maximise the utilisation of the money.

The technical paper, first of its kind in the country, was prepared as the government is seriously planning to float sovereign bond in the global markets soon to help ease pressure on foreign currency reserve and improve balance of payments (BoP) situation.

The bond may be issued for five to 10 years. The minimum amount to be borrowed could be $500 million, the paper suggested.

According to the policy paper, the total global bond market in 2011 was worth $221 billion. Of the total, $9.0 billion was borrowed by a number of Asian countries, including Sri Lanka, Indonesia, Malaysia, Vietnam and the Philippines.

The Daily Sun/Bangladesh/ 1st May 2012

Not all tax identification number (TIN) holders will have to pay minimum tax in the next fiscal year, the National Board of Revenue (NBR) said yesterday.

The board, however, said it looks for scope to impose taxes on some TIN holders on a case-to-case basis and aims to bring the local government units such as pourashava and "growth centres" under the tax net by encouraging people to get TIN.

"Our target is to increase the number of TIN holders to get more tax," said NBR member on income tax policy Syed Md Aminul Karim, responding to the media at a press briefing at the NBR office in Dhaka.

“But we are not thinking of imposing taxes on all TIN holders,” he said.

NBR Chairman Nasiruddin Ahmed and other members were also present.

The tax collector shared the view days after Finance Minister AMA Muhith said the government considers imposing minimum tax on all of the 30 lakh TIN holders. Of them, only one-third submit returns.

The NBR said it collected Tk 62,737 crore in July-March of the current fiscal year with an 18 percent growth and expects to beat the entire year's target at Tk 91,870 crore.

In the next fiscal year beginning in July, the NBR aims to collect Tk 112,350 crore in revenue, said its chairman.

"We will also say good-bye to the PSI (pre-shipment inspection) system next year," said Ahmed, adding that the system would stand scrapped from December.

"We are formulating an exit strategy the system," he said.

On whether black money will be allowed to be legalised in the next fiscal year also, Ahmed said there is a provision in the income tax law that one can show his undisclosed money under the head of "income from other sources".

NBR accepts such undisclosed income by imposing up to 25 percent taxes without question. This provision will remain in force through the next fiscal year.

"We will not question if anyone shows his income as income from other sources," said the NBR chief.

The NBR said there is no limit to 'income which can be shown as income from other sources'.

The tax administrator, however, could not give any information on how much undisclosed money may become legalised under the provision of the current law.

Ahmed said the NBR also considers scanning 'transfer pricing' in the upcoming income tax law in a bid to curb siphoning off money out of the country by manipulating the system.

Some $1.8 million are siphoned off from the country each year through the misuse of transfer pricing, said the NBR chairman, citing estimates by various sources.

Transfer pricing happens whenever two related companies -- that is, a parent company and a subsidiary, or two subsidiaries controlled by a common parent -- trade with each other.

For instance, a US-based subsidiary of Coca-Cola buys something from a French-based subsidiary of Coca-Cola. When the parties establish a price for the transaction, they are engaging in transfer pricing.

Transfer pricing is not, in itself, illegal or abusive. What is illegal or abusive is transfer mispricing, which is also known as transfer pricing manipulation or abusive transfer pricing.

"It is very important and is also practisced in other countries," Ahmed said, adding that the NBR would scan how multinational companies use transfer pricing. The NBR would provide training to its officials who will examine transfer pricing, he said.

Ahmed also said the proposed VAT law would be placed in parliament in June for passage.

The Daily Star/Bangladesh/ 1st May 2012