SoBs see 60.0% fall in recapitalization fund

The allocation for state-owned banks’ recapitalization is set to fall by 60% for the next fiscal year (FY) 2016-17 compared to the original budget for the outgoing fiscal. The allocation for the SoBs is to come down to BDT 20.0 billion in the FY 17 from BDT 50.0 billion for the FY 16, according to the proposed budget documents. The ministry of finance has already revised such an allocation to BDT 18.0 billion from the original budget estimation of BDT 50.0 billion, the documents showed. Bangladesh started implementing the Basel-III for calculation of capital-to-risk weighted assets ratio (CRAR) of all banks from the first quarter of 2015 aiming to consolidate the stability in the banking sector. The government had expended BDT 26.2 billion to meet the capital shortfall of the SoBs in the FY 15, the budget documents showed. The central bank is now unwilling to play any effective role for further injection of public money to meet capital shortfall of the public banks.

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143072

Interest rate cut on savings instruments likely

Finance Minister AMA Muhith has hinted at cutting interest rates on savings instruments to reduce the expenditure cost. The government has set the borrowing target from National Savings Schemes at BDT 196.1 billion at the proposed budget for the fiscal year 2016-17, higher from BDT 150.0 billion in the current fiscal year. Though the proposed estimate is higher from previous actual budget, the amount is lower from the revised financing of BDT 280.0 billion from savings instruments. On the other hand, the government has set borrowing target from banking system at BDT 389.4 billion in the proposed budget, slightly higher from BDT 385.2 billion targeted for current fiscal year. However, the real borrowing was around BDT 250.0 billion, far below from the revised target of BDT 316.8 billion for fiscal year 2015-16. Bank borrowing was sluggish as government was getting financing more from savings instrument than the target due to high interest rate. Currently, the interest rates on savings schemes are around 12.0% while deposit rates are hovering in between 6.0% and 7.0%. Demand increased from all the authorities concerned to cut interest rate on savings instruments to bring balance in interest rate in the market. But, the government was against the demand considering the pensionaries.

Source: http://www.dhakatribune.com/business/2016/jun/03/interest-rate-cut-savings-instruments-likely#sthash.Toea7TId.dpuf

Remittance dips by 3.0% in Jul-May

The country’s remittance inflow in the July-May period of the current financial year 2015-16 declined by 3.1% to USD 13.5 billion from USD 13.9 billion in the corresponding period of the previous year. Declining global oil prices have affected the remittance inflow in the last few months as the lion’s share of Bangladesh’s remittance earnings comes from oil-based economies in the Middle East, Bangladesh Bank officials told New Age on Saturday. If the remittance inflow maintains the downtrend, the people’s consumption capacity may shrink which will ultimately affect the GDP growth, they said. The remittance inflow in May declined by 8.8% to USD 1.2 billion compared to that of USD 1.3 billion in the same period of the previous year, according to Bangladesh Bank data released on Thursday. According to the BB data, in May, the private commercial banks received USD 797.1 million in inward remittance, while the state-run commercial banks received USD 379.1 million, foreign commercial banks USD 17.1 million, and specialized development banks USD 12.3 million. In May, Islami Bank Bangladesh received the highest amount of remittance at USD 279.4 million among the private commercial banks, while Agrani Bank got the highest amount at USD 138.9 million among the state-run banks.

Source: http://newagebd.net/233688/remittance-dips-by-3pc-in-jul-may/

Inflation rate to be 5.8%

The government has forecast the inflation rate at a comfortable level of 5.8% in the next financial year (FY) 2016-17 as it sees declining trend of oil prices in the global market and buoyant local food production. The Bangladesh Bureau of Statistics (BBS) data has showed the country’s point-to-point inflation had fallen to 5.6% in April this year. Meanwhile, the government in the outgoing FY2016 had set a target to bring the inflation within a 6.2% limit from a higher trend in the previous fiscals. Muhith said Thursday in his budget speech: “In addition, in terms of macroeconomic management, we will ensure continued harmonization of fiscal and monetary policies. In this context, I have set inflation target at 5.8% for the next the fiscal year.”

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143086

Government won’t enforce new VAT law next fiscal

Backtracking from the plan to implement the new Value Added Tax (VAT) and Supplementary Duty (SD) Act 2012, Finance Minister A M A Muhith has proposed to continue the existing VAT Law 1991 in the upcoming fiscal year (FY) 2016-17 also. The government has decided to fully implement the new Act from 1st July of 2017, he said in his budget speech in the parliament on Thursday. Value Added Tax and Supplementary Duty Act 2012 was enacted after a lot of deliberations, the finance minister also said. The finance minister also proposed some changes for simplification of the procedures to the VAT Act 1991 and VAT Rules 1991 for preparing the ground for complete implementation of the new Act. He proposed withdrawal of the price declaration system from the upcoming FY. In the free market economy, determination of price of any goods is absolutely a strategic business decision of the manufacturer concerned, he opined. But since the introduction of VAT system in Bangladesh in 1991 a provision has been kept in the VAT rules requiring the taxpayers to get the prices of the goods approved by the VAT authority.

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143078

Price, tax on cheap cigarettes go up

The government has proposed to increase both price slab and tax rates of cheap cigarettes in the budget for fiscal year (FY) 2016-17 with the aim to reduce the consumption of the health-hazardous tobacco items. Price slab for 10-stick packet of cigarettes has been raised to BDT 23.0 or more from the existing price of BDT 18.0 and Supplementary Duty (SD) to 50.0% from the existing 48.0%. The budget proposal did not increase any price for the medium and high segment cigarettes which are currently available at BDT 45.0 and above and leaving the price fixation decision on the manufacturer. Finance Minister said on the other hand, the price of 25 sticks of non-filter and 20 sticks of filter bidi stands at BDT 7.06 and BDT 7.98 respectively. Due to its easy availability, large number of people smoke this product and become vulnerable to health risk. Taking all these factors into consideration, he proposed to rationalize the existing tariff value and supplementary duty of this two kinds of bidi by raising the SD rate from 25.0% and 30.0% to 30.0% and 35.0% respectively. Talking about smokeless tobacco products, the finance minister said in order to discourage the people to reduce its consumption significantly, enhanced supplementary duty on these products (namely, Jarda and Gul) has been proposed from 60.0% to 100.0%.

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143087

Provision of whitening black money remains

The proposed budget for upcoming fiscal year (FY) has kept the provision of legalizing undisclosed income with the payment of penal tax unchanged. The opportunity is in the income tax law under which people having undisclosed income can invest in real estate and other income generating sectors. Undisclosed money can be legalized through purchasing residential buildings and flats with the payment of tax at varying rates for different cities up to BDT 7,000 per square meter. There is a provision in the income tax ordinance under which people can voluntarily disclose their undisclosed income. Money can be invested in income-generating sectors such as ‘industrial enterprises, balancing, modernization, renovation and extension of an existing industry, buildings, apartments, land, securities listed with stock exchanges and any trade, commercial and industrial venture engaged in production of goods and services’ by paying 10.0% penalty along with regular tax at applicable rate for the taxpayers. In the pre-budget proposals, different tax zones have proposed the tax authority to incorporate a provision to allow the untaxed money without question to attract investment. Real Estate and Housing Association of Bangladesh (REHAB) also demanded for indemnity on such investment in the budget. According to the NBR data, only 222 untaxed money holders legalized BDT 6.8 billion in the FY 2014-2015 through investment in income generating sectors by paying 10.0% penalty along with regular tax and NBR received only BDT 275.0 million in income tax.

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143080

15.0% customs duty under new slab

Finance Minister AMA Muhith has proposed introduction of a five-tier tariff structure for the fiscal year (FY) 2016-17 in a bid to rationalize the existing customs duty to safeguard the local industry. Currently, a four-tier tariff structure is in force for realizing customs duty on products, also categorized into four groups. The product groups and the applicable duties are: capital machinery and spares–1.0%, basic raw materials 5.0%, intermediate raw materials 10.0% and finished products and final consumer goods 25.0%. A new slab of 15.0% customs duty has been created. As a result, now, the slabs would be 1, 5, 10, 15 and 25. The rate of Regulatory Duty (RD) has been cut to 3.0% from 4.0% in the next budget. Duty on cigarette paper and tube pipe will rise. Instead of any significant change, the duty rates have been liberalised and rationalised in order to prevent misdeclaration and duty evasion, said Mr Muhith.

Source: http://print.thefinancialexpress-bd.com/2016/06/03/143074

Export tax for RMG, other sectors hiked

The government on Thursday proposed to increase the tax at source for the country’s export-oriented sectors including readymade garment exporters to 1.5% for the next financial year 2016-17. Finance minister AMA Muhith made the proposal before the parliament while placing the proposed national budget for the upcoming financial year 2016-17. The readymade garment exporters, however, opposed the proposal saying that the increase in the tax at source at the rate of 1.5% would be disastrous for the sector. Currently, the apparel makers and other export-oriented sectors pay source at tax at the rate of 0.6%. In the last budget, the government increased tax at source to 1.0% but later it was reduced to 0.6% following demands from the clothing products exporters. The government also proposed to reduce tax rate for the readymade garment sector to 20.0% from existing 35.0%. The reduced 20.0% tax does not mean that RMG exporters would have to pay the tax but tax at source is considered as final tax liability for the RMG sector. It is a special benefit for the RMG exporters as their income will be calculated based on the reduced 20.0% tax rate.

Source:
http://newagebd.net/233291/export-tax-for-rmg-other-sectors-hiked/
http://www.dhakatribune.com/business/2016/jun/03/tax-source-export-raised-15#sthash.Wh5KktVq.dpuf

RMG corporate tax cut, but ‘still high’

In the proposed budget, corporate tax on the export-oriented readymade garment industry has been reduced to 20.0%. “As part of our continued support, I propose to reduce the tax rate of the RMG sector from 35.0% to 20.0%,” said Finance Minister AMA Muhith in his budget speech yesterday. However, the garment exporters’ demand was to cut the rate to the FY2014-15 level which was 10.0% as high corporate tax “discourages new investment.” “The proposed 20.0% rate is still high. We asked for 10.0% as high corporate tax discourages new investment into the industry,” BGMEA Vice-President Mohammad Nasir told the Dhaka Tribune in an immediate reaction after the rate was proposed. Bangladesh Garment Manufacturers and Exporters Association (BGMEA) demanded a 10.0% rate as corporate tax for the industry which makes up more than 80.0% of the country’s total export earnings.

Source: http://www.dhakatribune.com/business/2016/jun/03/rmg-corporate-tax-cut-still-high#sthash.NKYSHBV0.dpuf

Budget implementation to be uphill task: CPD

Centre for Policy Dialogue, a civil society think tank, on Friday said implementation of the proposed budget for 2016-17 fiscal would face challenges as there is uncertainty over how the targeted revenue will be collected. About the growth rate, Debapriya Bhattacharya said, ‘We think the achievement of the targeted 7.2% growth of GDP is nothing impossible and which is essential also. But an additional BDT 800.0 billion private investment is needed to attain the target. The growth of non-development expenditure is higher than development expenditure, which is a new feature of the budget, the CPD distinguished fellow said. Non-development expenditure has gone up massively mainly because of the salary hike of public servants, subsidy, big allocation for investment in the capital market and incentives for some export items, he explained. He observed that increased allocations for education, gender equity, social safety net are good signs for the budget. But the allocation in agricultural sector needs to be increased, while the reporting mechanism in defense budget should be transparent, he emphasized. The noted economist, however, said this year the budget was placed in a comfortable macroeconomic environment with robust GDP growth, low inflationary pressure, favorable balance of payment and augmented foreign exchange reserve, declining interest rate, resilient growth of export earnings, manageable fiscal deficit and low level of global commodity prices.

Source: http://newagebd.net/233423/budget-implementation-to-be-uphill-task-cpd/

BGMEA pleads for slashing source tax to 0.3%

Expressing their concern over the proposed hike in source tax, leaders of the country’s apparel sector Friday demanded reduction of the rate to 0.3% to help enhance their competitiveness in the global market. Hailing the finance minister’s proposal for reducing corporate tax to 20.0% from existing 35.0%, they also requested the government for further cut in corporate tax to 10.0%. “The government proposed 150.0% hike in indirect tax by proposing 1.5% source tax from the existing 0.60% for all export-oriented sectors which is contradictory to the growth of industry,” Md Siddiqur Rahman, president of Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said while addressing a press conference. The conference was organized at the BGMEA’s headquarters in the city just after a day the government announced the proposed budget for fiscal year 2016-17.

Source:
http://print.thefinancialexpress-bd.com/2016/06/04/143181
http://www.thedailystar.net/business/bgmea-urges-continue-03-source-tax-1233895

Cos must submit returns on withholding tax twice

Companies, cooperatives and non-governmental organizations (NGOs) may now have to submit withholding tax returns twice a year, mandatorily, under a new fiscal regime. The deducting authorities on the withholding tax, known as tax at source, will also face audit from the upcoming fiscal year (FY) 2016-17 by the taxmen as per strict provisions incorporated into the Finance Bill 2016. In case of failure in deduction of tax or deduction at lower rate or failure in depositing the amount, the deducting authorities may have to take the liability for the tax supposed to be deducted and deposited with the government exchequer. They also have to pay 2.0% additional tax on the payable amount, says the finance bill that tries to plug the loopholes that help drain out due revenues and contribute to target shortfalls. Talking to the FE a senior tax official said the proposed provision in the income tax law will check irregularities in tax collection in this sector that contribute 57.0% of the total tax-revenue collection. Currently, 250,000 public and private entities are responsible for deducting withholding tax. The tax official said pay-roll tax, deducted at source by the employers from salaries of employees, contributes only 4.0% to 5.0% to total tax collected at source.

Source: http://print.thefinancialexpress-bd.com/2016/06/05/143271

BPC gets back job of importing furnace oil

The Energy and Mineral Resources Division has revoked its earlier order and allowed the state-run Bangladesh Petroleum Corporation (BPC) to import three cargoes of furnace oil amounting to 60,000 tonnes in total within this month, a senior BPC official told the FE Saturday. The Division had asked BPC to stop importing furnace oil from January last and allowed the private sector to do the job. But after five months, the authorities have realised that the step was ‘faulty’ and asked the BPC to resume import of furnace oil. Sources said the process of selecting the oil supplier was also ‘flawed’ as the BPC selected Philippines National Oil Company (PNOC) in a week without issuing any tender, said the official. This will, however, be BPC’s first furnace oil import in 2016 after deciding to skip import of the fuel from January 2016 and thus leave the trade to private importers. Bangladesh Power Development Board (BPDB) had sought the supply of the fuel to run its furnace oil-fired power plants, which forced BPC to arrange import of the fuel on an urgent basis, the BPC official informed. The premium on furnace oil import has been fixed at USD 15.0 per tons to Mean of Platts Arab Gulf (MOPAG) assessments for this fuel.

Source: http://print.thefinancialexpress-bd.com/2016/06/05/143273

BPC profits to treble this year

Bangladesh Petroleum Corporation is set to log in profit of BDT 121.9 billion for fiscal 2015-16, which is three times more than in the previous year, in spite of the recent price cuts, according to the finance ministry’s provisional estimate. After five consecutive years of losses, BPC last year made a profit of BDT 41.3 billion. The fuel price has been on a slide since June 2014 in the international market but Bangladesh did not adjust it domestically, which contributed to the profit. The government made some price adjustments recently in response to the demand of economists and businesses, but there is still a big discrepancy between the international and local prices. On March 31, the government cut the price of furnace oil, mostly used by industries and power plants, by more than 30.0% to BDT 42.0 a liter. Then on April 24, the government brought down the prices of octane and petrol by BDT 10.0 a liter and diesel and kerosene by BDT 3.0 per liter. Despite the cuts, the BPC will still make profit of BDT 23.0 to BDT 28.0 per liter of petrol and octane and about BDT 16.0 in diesel and kerosene. However, the amount is slightly lower than last fiscal year’s BDT 41.8 billion. On the basis of information up to April, it appears that 34 of the 46 state-owned enterprises are on course to logging in profits for the fiscal year, according to Bangladesh Economic Review 2016.

Source: http://www.thedailystar.net/business/bpc-profits-treble-year-1234519

SoEs net profit jumps by 173.0% in FY’16

The government experienced a sharp rise in net profit by 173.0% in the fiscal year 2015-16 from the state-owned enterprises (SoEs) backed by Bangladesh Petroleum Corporation (BPC) earning. The Oil price fall in global market helped the government bag a huge profit, said the authorities concerned. According to the statistics of Bangladesh Economic Review 2016, the net profit from SoEs stood at BDT 117.9 billion as of April 2016 of the current fiscal year compared to BDT 43.2 billion in the previous fiscal year. The profit growth was 52.0% in the fiscal year 2014-15 from the earning of BDT 28.4 billion. The government profit saw a high jump as BPC capitalized on the oil price fall in the global market and earned BDT121.9 billion in the current fiscal year which was 195.0% higher from BDT 41.3 billion in the last fiscal year. Though the Saudi Arabia’s economy is suffering badly for crash in oil price, it brought a blessing for Bangladesh, said a senior executive of BPC. Though the government earns big from SoEs, it gives subsidy to some SoEs that went up by 37.0% in the current fiscal year. The total amount of subsidies stood at BDT 18.2 billion as of April 2016 of the current fiscal year compared to BDT 13.3 billion in the last fiscal year.

Source: http://www.dhakatribune.com/business/2016/jun/05/soes-net-profit-jumps-173-fy16#sthash.7Y77G7zy.dpuf

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Exchange Rates

*Currencies and Commodities are taken from Bloomberg.