Economy
BGMEA, BKMEA for lowering tax at source at 0.5p
BGMEA: Bangladesh Garment Manufacturers and Exporters Association and the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA) on Tuesday (7th March) urged the government to reduce the tax at source on export of RMG items at 0.5 percent from the existing 1 percent and thus keeping it for the next five years.
The leaders of the two major associations also demanded of the government to waive the 10 percent income tax on cash support against exports as well as make the corporate tax at 10 percent for the green RMG factories.
The leaders of BGMEA, BKMEA and Bangladesh Textiles Mills Association (BTMA) raised such demands at a pre-budget meeting with the National Board of Revenue (NBR) held at the NBR Bhaban in the capital’s Agargaon area.
Presided over NBR Chairman Abu Hena Md Rahmatul Muneem, leaders of BGMEA, BKMEA and BTMA attended the meeting.
Explaining the rationality of their demands, BGMEA President Faruque Hassan said that the foreign buyers have reduced the work orders due to the impacts of the COVID-19 pandemic and the Russia-Ukraine war.
He said although the exports have increased in terms of value, the volume of exportable items has reduced. Under the circumstances, Faruque proposed for re-fixing the tax at source at the previous 0.50 percent to face the evolving challenges and thus keeping such facility for the next five years.
However, the BGMEA president demanded of the NBR to increase the number of authorized economic operators (AEO) to ensure speedy shipment and unloading of goods.
The other notable demands from BGMEA include giving VAT exemptions to some 12 RMG related firms to increase the export competitiveness, resolving the HS code-related complexities, reduction of duty on import of washing dry machines and fire extinguishing equipment.
Echoing the demand of BGMEA to reduce tax at source against exports, BKMEA executive president Mohammad Hatem urged the NBR to reconsider the issues related to tax at source.
Hatem also requested the NBR to exempt the RMG factories on mandatory submission of zero VAT returns, fixing the duty and VAT at zero percent on import of chemicals for setting up solar panels and ETPs.
The leaders of BTMA proposed for waiving all types of duty and VAT at import stage on all types of fibres including recycled fibre and man-made fibre.
Despite Bangladesh Bank’s initiatives to promote good governance in the banking sector, 17 banks have recently violated their loan disbursement limits, and are now embroiled in a severe liquidity crisis.
Having been over-aggressive in providing loans, they are now unable to recover the loans and attract new deposits as desired, according to the latest internal report of the central bank.
The banks should not sanction any new loans until they restore the ratio of their loans to deposits in accordance with limits set by Bangladesh Bank, which regulates the financial sector.
Conventional banks can provide loans of up to Tk 87 for every Tk 100 in deposits, while Shariah-based banks can give loans of up to Tk 92 for every Tk 100 in deposits, according to the rules of Bangladesh Bank.
This is called Advance Deposit Ratio (ADR) or loan-deposit ratio limit in banking terms.
According to the central bank report covering January 1-26 of this year, 17 banks violated the limits set for them on lending orders due to a lack of discipline.
As a result, the concerned banks have been plunged into an extreme liquidity crisis, making it difficult for them to sanction new loans. Some of them are even unable to pay depositors in some cases.
Experts fear that the existing situation has created additional risks for depositors. According to them, irregularities, corruption and ‘ghost loans’ – loans to firms that turn out to be non-existent -are behind the collapse of the banking system’s loan disbursement process.
“In the banking sector, there have been allegations of giving large amounts of ghost loans in recent times. If this continues, the sector will be at risk,” said ABM Mirza Azizul Islam, economist and adviser on finance to the last caretaker government.
Mirza Azizul told, “Lending beyond the limit against deposits disrupts the credit system.”
Besides, the debt collection situation of the banks is not satisfactory now. In such a situation, if the non-performing loans increase further with additional loans, then there is a danger for the bank and its depositors will suffer, he added.
He suggested the intervention of the central bank in these banks immediately.
According to the Bangladesh Bank report, the ADR of National Bank Ltd stood at 98.23 while that of AB Bank was 96.64 in its conventional stream and 103.45 in its Shariah stream.
State-owned Basic Bank’s ADR stood at 91.17, One Bank’s was 89, and multinational National Bank of Pakistan’s was 87.52. Widespread irregularities and corruption have already been reported in these banks.
Apart from this, Community Bank’s ADR was 88.28, NRB Bank at 88.05 and IFIC Bank’s ADR was 87.48, the report states.
Shariah-based Exim Bank’s ADR stood at 100.28, Standard Bank’s at 96.28, Premier Bank’s Islamic Window 155.09 and Bangladesh Commerce Bank’s Islamic Window’s ADR was at 133.26.
Apart from this, the ADRs of five other Shariah-based banks ranged between 93.01 and 104.54.
A managing director (MD) of a private bank told that the lending limit has undoubtedly been set by Bangladesh Bank based on adequate research and global best practices. No bank should have to cross the limit.
“These violations are creating risk in the banking sector. Depositors in particular will be at greater risk. Already some banks and non-bank financial institutions are not able to return money to depositors,” he said, maintaining anonymity.
The central bank has also extended the period of ADR adjustment five times to allow the banks to bring their lending practices in line with the limits.
However, many banks could not coordinate this. In such a situation, Bangladesh Bank even increased the required ADR to improve the overall liquidity situation of the banking sector to maintain the pace in credit flow to the private sector.
The executive director and spokesperson of Bangladesh Bank, Md Mezbaul Haque, told that although some banks may at times find themselves in violation of the ADR set for them, the central bank would under normal circumstances give them time to get themselves back within the limit.
“But if they stay outside the limit for long, then they must be warned and action would be taken accordingly,” Mezbaul said.
Bangladesh and Bhutan have signed an agreement on the movement of traffic in transit on Wednesday (22nd March).
Commerce Minister Tipu Munshi signed the agreement on behalf of the government of Bangladesh.
This landmark agreement is expected to facilitate trade and commerce between both countries for shared prosperity, said the Ministry of Foreign Affairs to the news media.
Muslim authorities in Saudi Arabia and several other Middle Eastern countries announced this year’s fasting month of Ramadan will begin Thursday based on the expected sighting of the crescent moon. However the capital, Dhaka to begin fasting from Friday.
Clerics across the region said the moon was not visible Tuesday night, meaning it will almost certainly appear the following evening, heralding the start of the monthlong observance.
During Ramadan, Muslims refrain from eating, drinking, smoking, and having sexual intercourse from sunrise until sunset. Even a tiny sip of water or a puff of smoke is enough to invalidate the fast. At night, family and friends gather and feast in a festive atmosphere.
The fasting is aimed at bringing the faithful closer to Allah and reminding them of the suffering of the poor. Muslims are expected to strictly observe daily prayers and engage in heightened religious contemplation. They are also urged to refrain from gossiping, fighting, or cursing during the holy month.
Fasting is one of the five pillars of Islam and is required for all healthy Muslims. But there are exemptions for those who are ill, and for women who are pregnant or breastfeeding.
Islam follows a lunar calendar, so Ramadan begins around a week and a half earlier each year. At the end of Ramadan, Muslims celebrate the joyous Eid al-Fitr holiday, when children often receive new clothes and gifts.
