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Market stakeholders urged the revenue authority to widen the corporate tax rate gap to at least 10 percentage points between listed and non-listed firms so that good companies feel encouraged to float shares to the public.

At present, listed firms, except for banks, insurers, financial institutions, mobile operators, and tobacco companies, which have issued shares equivalent to more than 10 per cent of their paid-up as free float, pay 20 per cent corporate tax a year while their non-listed peers pay 25 per cent tax, subject to compliance with some conditions.

The tax rate is 22.5 per cent for the listed firms having free float equivalent to 10 per cent or less of their paid-up, which is raised further to 25 per cent if companies fail to meet certain regulatory conditions, such as maximum cash transactions of Tk 3.6 million in a year.

Five years ago, the tax rate gap between listed and non-listed companies was 10 percentage points, which was cut to 5 percentage points last year despite repeated requests from market stakeholders for an expansion of the gap.

As a result, the flow of initial public offerings (IPO) dried up; not a single company listed in 2024.

Leaders of the Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE), Bangladesh Merchant Bankers Association (BMBA) and the DSE Brokers Association of Bangladesh submitted their proposals for FY26 to Chairman of the National Board of Revenue Abdur Rahman Khan.

At a pre-budget meeting on Monday, they also suggested formulating a tax strategy for qualitative development of the capital market.

The NBR chief, however, said tax benefit alone would not help the market flourish, rather good governance must be ensured to regain investors’ confidence. Listing of weak companies in the market was a major reason for the erosion of investors’ confidence in the market, he added.

Capital gain tax must be paid on hefty profits

DSE Chairman Mominul Islam sought complete exemption of capital gain tax for individual investors, considering the present market situation.

Individual investors now have to pay a 15 per cent capital gain tax on income exceeding Tk 5 million a year from share trading.

The NBR chief rejected the proposal, saying, “If anyone makes such a hefty amount in capital gain, they should pay tax.”

“We are coming out of the culture of [tax] exemption. We have vowed not to give exemptions anymore,” said the NBR chief.

The DSE proposed reducing tax at source on share transactions to 0.015 per cent from the existing 0.05 per cent, considering the current volatile situation of the market.

The reduction will ultimately boost trade volume and tax collection, the premier bourse said in its proposal.

The Dhaka bourse also sought tax exemption on interest earned from listed bonds.

Moreover, the prime bourse proposed exempting stock dealers from paying tax on income derived from share trading. Currently, 10 per cent tax is applicable to them on their commission income.

“Stock dealers are an integral part of the capital market. Their participation in the market brings stability,” said the DSE chief.

Merchant Bankers demand tax reduction

The merchant bankers association submitted a seven-point budget proposal, including a reduction in the capital gain tax for institutions by 5 percentage points from the existing 10 per cent.

Another proposal was to widen the tax rate gap by at least 10 percentage points between listed and non-listed companies without any conditions.

“More non-listed companies will be inspired to go public if the amount of corporate tax is reduced. The government revenue will increase as well,” reads the proposal.

Merchant bankers also proposed lowering corporate tax for them to 25 per cent from existing 37.5 per cent, withdrawing tax from stock dividends, and reducing VAT rate on products manufactured by listed companies to 10 per cent from 15 per cent flat rate.

There are 67 merchant banks in operation in Bangladesh and most of them are struggling to stay afloat due to the prolonged bearish trend of the stock market, the association said.

The BMBA also urged the NBR to address the matter of double taxation.

Tax on dividends is being deducted at source and then taxpayers again need to pay income tax when annual dividend income crosses Tk 50,000.

CSE draws attention to double taxation

The CSE too demanded cancellation of tax at source on dividends paid by listed companies in a bid to avoid double taxation.

It also sought a five-year tax holiday for the newly-formed commodity exchange to facilitate its implementation and other infrastructural developments.

The CSE sought a tax waiver for SME companies for the first three years after listing and then 15 per cent corporate tax on them. That will, the bourse said, help strengthen the corporate structure of SME companies.

The CSE also proposed increasing the annual cash transaction limit to 10 per cent of total business turnover instead of fixing it at Tk 3.6 million.

today.thefinancialexpress.com.bd

 IPO Bangladesh