Transfer Tax could kill leasing industry

A proposed transfer tax on assets proposed in the last budget could kill the leasing industry, a senior finance company official has warned.
E.H. Wijenaike, managing director of Central Finance, told the Sunday Times FT that the tax on transfer value of an asset at the end of a lease would make leasing unviable.
The proposed tax will be on an asset that is transferred at the end of a lease that the leasing firm is liable to pay and would be compelled to charge from the client.
“If they were to go ahead with it (tax) there would be no more leasing,” Wijenaike said. “It has to be collected from the client but he is not going to pay our income tax.”
He said he believed the government proposed the tax to curb perceived abuses of tax incentives.
However, the government had indicated it may not go ahead with the transfer tax following objections from the industry, Wijenaike said.
Finance Ministry officials were not available for comment.
Wijenaike also said Central Finance had introduced a deposit scheme especially for retired people who depend on their savings.
Many depositors had been affected by falling interest rates with the impact particularly adverse on senior savers in the age group of over 60 years, who depend mainly on interest income on their fixed deposits.
To give them some relief, the company has launched the Senior Citizens deposit scheme under which depositors enjoy the benefit of higher interest rates.
“This has proved to be popular and attracted Rs. 675 million,” Wijenaike said. “We have a fair amount of depositors who are senior savers. They complained of rates going down. So we introduced a deposit scheme where we pay slightly higher rates.”
The company can recoup the extra cost by exploiting opportunities of lending the money elsewhere, he said.
Wijenaike reported in the company’s annual report that growth in core earnings for the year ended March 31, 2004 was up 46 percent to Rs 1.2 billion.
This excludes exceptional income such as capital gains on share trading and land sales, which contributed Rs 367 million in the year under review.
Growth in new business originations was up 26 percent to Rs 6.4 billion.
Central Finance plans to expand its market share and open another five marketing offices in 2005 given the fact that almost half of its lending is generated from the outstations.