New financial transactions levy ‘worrying’
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Reputed banker Rajendra Theagarajah expressed concern over the proposal to introduce a new levy called Financial Transactions Levy FTL.
This is as a contribution for social development at the rate of Rs. 5 per Rs.10,000 on the total cash transactions including easy cash by banks and other financial institutions. FTL will be treated as expenditure for income tax purpose.
He noted that this proposal is inconclusive and more clarity is needed to make it practical as it exerts an impact on the Rs. 97-trillion banking sector. This transaction levy will account for at least Rs. 47 billion, he said.
Mr. Theagarajah pointed out that an incremental impact could be expected from the proposed change in taxes for the banking sector.
Director/CEO of Asia Asset Finance Ltd Rajiv Gunawardena said leasing for motor cars and vans will be allowed up to 50 per cent of total value of vehicle and three wheelers 25 per cent in accordance with the new budget proposal. This will affect finance companies. This was the fourth time the Loan-to-value (LTV) ratio was changed under the present government, he said.
The imports of cars and three-wheelers will be reduced greatly by this move but the finance company’s business and the government’s tax revenue from vehicle imports will come down further, he said adding that the main factor increasing the demand for vehicles is credit.
When the larger banks and finance companies started offering leases at interest rates ranging from 9 to 10 per cent, demand skyrocketed, he said noting that the government’s move is aimed at reducing vehicle imports which is an urgent need.
He revealed that the government has taken measures to discourage vehicle imports by imposing high excise duties on vehicles, lowering the loan to value ratio (LTV) and imposing a stamp duty on vehicle financing transactions.