A special opportunity for individuals to whiten undisclosed money by paying just 15 per cent tax is likely to return in FY2024-25 as an amnesty.
As per the finance ministry plan and proposed provision, no authority can raise questions if anyone pays tax at fixed rates for immovable assets such as flats, apartments, and land, and 15 per cent tax on other resources, including cash, irrespective of the country’s existing laws.
This scope may not allow for capital market investment in the FY25 budget, ministry sources said.
Meanwhile, in the next FY, the government may impose a 15 per cent capital gains tax on stock market earnings exceeding Tk50 lakh for individuals. Currently, individual stock investors do not pay any capital gains tax.
Stakeholders said the upcoming budget for the FY25 will give neither good nor bad news to capital market investors.
Market insiders however believe that the budget will reflect the requirements of stock exchanges, brokers, merchant bankers, listed companies, and investors.
The finance ministry thinks due to unavoidable reasons, including the taxpayer’s ignorance in filing the return, there may be errors in showing the acquired assets.
In this situation, the government will propose to add a clause on tax incentives in the Income Tax Act to provide taxpayers with an opportunity to correct this error in their income tax returns, and to increase the flow of money into the mainstream economy.
Besides, tax will be imposed on any capital gains exceeding Tk50 lakh received by a natural individual taxpayer from transfer of shares or units of a listed company or fund. Currently individual stock investors do not pay any capital gains tax in the capital market.
Dhaka Stock Exchange (DSE) Chairman Prof Dr Hafiz Md Hasan Babu said, “The stock market is still under pressure due to the post-pandemic shocks and the Russia-Ukraine war. Imposing new taxes at this time will only create more pressure on investors.”
His call came after the National Board of Revenue (NBR) recently disclosed a proposal to impose a 15 per cent income tax on capital gains, which is now tax-free.
Hafiz also called for reducing source tax in the FY25 budget, and proposed to decrease the corporate tax on listed companies by 2.5 per cent to 17.5 per cent from 20 per cent.
He added that the corporate tax gap between listed and non-listed companies should be increased from 7.5 per cent to 10-12.5 per cent to encourage good companies in the capital market.
Currently, the corporate tax gap between listed and non-listed companies is 7.5 per cent.
Stakeholder demands for FY25 budget
The country’s prime minister had earlier said, taking into account the overall economic development of the capital market and the country, new taxes should not be imposed on the capital gains earned from the securities transactions of companies listed on the stock exchange.
Besides, the tax rate stated in SRO No 196 on the securities transactions listed on the stock exchange should be reduced.
The rate of tax deducted at source on transaction value may be reduced from 0.050 per cent to 0.020 per cent.
The corporate tax gap between listed and non-listed companies should increase from 7.5 per cent to 10-12.5 per cent, said the DSE.
Like zero coupon bonds, interest or income arising from any corporate bond listed on any board of stock exchange should be considered tax-exempt irrespective of the issuer or investor and is exempt from Section 106 of the Securities Income Tax Act 2023, on all types of bonds, including Sukuk.
Chittagong Stock Exchange PLC (CSE) Chairman Asif Ibrahim proposed that the upcoming national budget should have appropriate policy support for the capital market's qualitative expansion and sustainable development.
Asif Ibrahim said that investors account for less than one per cent of the country's population. The percentage of investors in the neighboring countries is close to 12 per cent. Similarly, there are several lakhs of commercial establishments in the country.
However, only 349 companies are currently listed in Bangladesh's capital market.
The CSE chair noted that for a stable capital market, this number needs to be increased to a satisfactory one within the next five years by listing good-quality companies. He also demanded that the corporate tax rate gap for listed and listed and non-listed companies be increased by at least 10 per cent.
"Additionally, the newly listed companies require tax exemption for at least two to three years," Asif said.
To increase investors' market participation, the double taxation on dividends and the taxation on institutional investors' capital gains must be abolished, he added.
His recommendations include increasing the tax concessions on collective investment schemes like mutual funds and ETFs and considering the deduction of taxes on capital gains as the final tax.
The CSE chairman also suggested incorporating strategies into the budget framework. Those are creating an effective private bond market, increasing the number of investors, diversifying products, and increasing the Tax-to-GDP ratio.
