Dhaka, Bangladesh (BBN) - Bangladesh’s stock exchanges urged the government to continue its full tax exemption facility on yearly income for another three years for sustainable growth and smooth operation of the exchange.
The leaders of the Dhaka Stock Exchange (DSE) and Chittagong Stock Exchanged (CSE) made the proposal as both the bourses are now incurring operating losses.
The proposals was made at a per-budget meeting for the fiscal year (FY) 2017-18 with the National Board of Revenue (NBR) Chairman Md Nojibur Rahman in the chair.
The meeting was held on NBR premises on Sunday.
The government provided full-tax exemption for the first two years of demutualisation of the exchange and it is supposed to pay taxes at graduated rates from this fiscal year.
Under a graduated rate system, the bourse will get full tax exemption in the first two years of demutualisation, 60 percent tax exemption in the third year, 40 percent in the fourth year and 20 per cent in the fifth year; it will have to pay full taxes after that.
Before the demutualisation, the stock exchange was a non-profit cooperative owned by the exchange members and was not subject to corporate taxes.
But with demutualisation, which is a way of separating management from ownership, the bourse was converted into a profit-oriented company owned by shareholders in 2013. As a result, it is subject to 35 per cent corporate tax.
“The DSE is now incurring operating losses. If the tax remains on, the DSE will have to increase transaction fees that will ultimately have to be paid by retail investors,” the premier bourse said in the proposal.
Abdul Matin Patwary, acting managing director of DSE, said the government would receive an insignificant amount of tax amounting to BDT 140 to BDT150 million from stock exchanges as it is under graduated rates of tax holiday facility for five years.
He proposed to offer full tax exemption for next three years as two years already passed off with tax exemption facility.
The leaders of the bourses also proposed to widen gap of corporate tax rate between the listed and non-listed companies to at least 5.0 to 10 per cent.
CSE MD M Shaifur Rahman Mazumder said difference of corporate tax rate should be widened to at least 5.0 per cent between listed and non-listed companies.
He also proposed for reducing the tax at source on share transactions to 0.015 per cent from existing 0.05 per cent, considering the market’s current volatile situation.
The reduction will bring down the cost of transactions, which will ultimately enhance trade volumes and related taxes.
The stock exchanges, on behalf of the government, collect the tax on the value of shares, mutual fund units or other securities transacted, and deposit the revenue to the state coffer.
They also urged the government to increase the ceiling of tax-free dividend income to BDT 100,000 from the existing BDT 25,000.
“Considering the market scenario, small investors should be allowed for tax exemption up to BDT 100,000 on dividend income, as they have suffered a lot due to the market turmoil previously,” said the DSE budget proposal.
“If the proposal is taken into consideration, it will help reduce the liquidity crisis of the capital market,” the premier bourse said. It was one of the proposals the premier bourse.
BBN/SK/ANS