Released on = April 14, 2006, 4:24 am

Press Release Author = Magna News & Feature Service Inc

Industry = Media

Press Release Summary = The government of Bangladesh is planning to bring the income
of non-governmental organizations from micro-credit operations under the tax net,
according to sources in the finance ministry.


Press Release Body = The government of Bangladesh is planning to bring the income of
non-governmental organizations from micro-credit operations under the tax net,
according to sources in the finance ministry.
The ministry has recently asked the National Board of Revenue to bring necessary
changes in the existing law, which will be incorporated in the Finance Bill 2006,
the sources said.
'Yes, our minister [finance and planning minister M Saifur Rahman] ordered the NBR
to bring the micro-credit business of all NGOs under the purview of tax,' a finance
ministry high official told reporters.
Nearly 800 NGOs, which are registered with the NGO Affairs Bureau and other
government organizations, will pay tax on their income from micro-credit operations,
if the government goes ahead with the pan.
Industrialists and businesspeople have long been demanding that tax should be
imposed on the businesses of the NGOs for what they say a level-playing field.
Criticisms are also there that the NGOs charge exorbitant interest rates on the
marginalized poor and expenditures and lifestyles of the top officials of a
significant number of NGOs lack transparency.
The income of the NGOs from micro-credit operations is tax free under the current
regulations. Their income from other business is taxable.
The Grameen Bank has, however, enjoyed immunity from taxes at different times,
thanks to a special ordinance, which expired in 2005, the sources said.
The finance ministry has recently turned down an application from the bank for
further tax immunity over the next 10 years, they added.
The government may earn more than Tk 1,000 crore, if tax is imposed on the NGOs'
micro-credit operations, sources estimate.
NBR high officials declined any comment on the issue.
Sources in the government have told New Age that bringing the NGOs under the tax net
is much easier said than done, as they have strong backing from donor communities
and multilateral lending agencies.
'Any harsh measure such as imposition of fresh tax or withdrawal of tax facility
would certainly frustrate the government as the national election is drawing
nearer,' a government high official told New Age. 'I hardly believe Saifur has
enough nerve to withstand the multi-pronged pressure that will entail.'
The sources said only the NGOs that charge more than 10-12 per cent interest on
micro-credit should be brought under the tax net, instead of wholesale taxation,
given their contribution to rural areas and employment.
Most of the NGOs currently impose interest ranging between 25 per cent and 34 per
cent on their micro-credit, according to the NGO Affairs Bureau.
'As no regulatory body overseas the interest rates of NGO, they have been charging
exorbitantly and earning considerably, which needs to be regulated or taxed,' a
bureau official said.


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