Micro lenders urge govt not to impose tax on their income
Microfinance institutions yesterday urged the government to shelve its plan to impose 10 percent tax on their net income from the next fiscal year, saying the additional taxes will affect small borrowers significantly.
“Poor people will be deprived of micro-credit as the cost of borrowing will increase due to the tax,” said M Mosharrof Hossain, chairperson of Credit and Development Forum (CDF), a platform of micro lenders.
The plan to impose the tax also goes against the government's efforts to eradicate poverty, he said.
Hossain spoke at a press conference at the National Press Club in Dhaka, co-organised by the CDF, the Federation of NGOs in Bangladesh, and International Network of Alternative Financial Institutions.
There are more than 700 micro-finance institutions (MFIs) registered by the Microcredit Regulatory Authority. The MFIs disbursed around Tk 40,000 crore during July-May of the current fiscal year, Hossain said.
There are nearly 2.50 crore borrower members of the MFIs and their cumulative deposits amounted to Tk 20,000 crore till May, he added. “The new tax will create a fund crisis, which may have a negative impact on credit flow,” said Abdul Awal, executive director of the CDF.
So far the incomes of the MFIs have been nontaxable. The National Board of Revenue had taken a move in 2005 to impose tax on them, but later put the plan on hold in the face of opposition from different quarters, including micro finance operators.
The MFIs are non-profit organisations as no individual or institution can take dividend from their earnings, said Md Emranul Huq Chowdhury, executive director of Uddipan, a micro lender. The MFIs use the surplus fund for poverty alleviation, he said. “Micro-credit disbursement is a service-oriented activity as it ensures credit for the poor. So it would be illogical to impose such taxes,” he said.
The new taxes will increase operating costs of microcredit programmes in remote areas, said Asif Saleh, senior director for strategy, communication and capacity of Brac, a leading micro lender with 48 lakh borrowers.
The government should give up the plan considering the role of microcredit in eradicating poverty, said Md Fayzer Rahman, executive vice president (operation) of ASA, another microfinance institution.
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