Stakeholders seek wider corporate tax gap between listed, non-listed firms

The country’s two stock exchanges and merchant bankers have sought a big gap in corporate tax between listed and non-listed companies in the upcoming national budget to attract good companies to the bourses.

The demand was made by the Dhaka Stock Exchange, Chittagong Stock Exchange, Bangladesh Merchant Bankers Association (BMBA) and Bangladesh Insurance Association (BIA) at a pre-budget meeting with the National Board of Revenue (NBR) in Dhaka on Tuesday.

Speaking at the event, BMBA President Sayedur Rahman said the reduction of corporate tax to 15 per cent for listed companies will encourage many companies to go public, and the government’s revenue income will also increase.

As per the existing rules, listed companies, other than banks, insurers, financial institutions, tobacco companies, and telecom operators, pay corporate tax at a rate of 22.5 per cent, compared to 30 per cent for non-listed companies.

DSE Chief Operating Officer M Shaifur Rahman Mazumdar said, “We propose to widen the corporate tax rate between listed and unlisted companies to 10 per cent from the existing 7.5 per cent.”

“Listed companies are required to disclose their financial and corporate governance details in detail. If the number of listed companies can be enhanced, total revenue collection will also be increased,” he said.

The reduced tax rate will encourage multinational and fundamentally strong companies to be listed on the exchanges, according to him.

The DSE also proposed a 10 per cent tax break for small and medium enterprises for five years from the date of listing.

The DSE, CSE and BMBA also demanded the money whitening facility for stock business without any question to increase cash flow to the capital market.

The DSE and the BMBA want the tax rate to be fixed at a flat rate of 5 per cent.

The DSE COO said that the proposed tax rate will channel undisclosed money to the real economy of the country and help develop the capital market.

In reply, NBR Member (Customs) Md Masud Sadiq said that the “beneficiaries” of such advantages hardly stand beside NBR when black money investment facility approval draws criticism.

In May 2018, the Bangladesh Economic Association estimated that around Tk 5-7 lakh crore of black money entered in the mainstream economy.

In FY12, the government allowed a 10 per cent tax provision for investing undisclosed money in the stock market. That initiative required a lock-in period of two years.

In the FY21 budget, Finance Minister AHM Mustafa Kamal also allowed investment in the stock market from unidentified sources on the condition that the investment was made with a 10 per cent tax and a one-year lock-in period.

The bourses also sought to increase investors’ tax-free dividend income limit to Tk 2 lakh from the existing Tk 50,000.

The DSE seeks an exemption from tax on interest earnings from bonds. Similar to a zero-coupon bond, interest earnings arising from any corporate bonds listed on any board of stock exchanges disregarding issuers and investors may be exempted from tax, it said.

Presently, the size of the corporate bond market is very small, which creates different limitations in the capital market as well as the money market. A vibrant bond market may help the economy in different ways, according to the DSE.

If tax exemption is allowed for all kinds of bonds, it will encourage the establishment of a vibrant bond market, the DSE said in the proposal.