Stakeholders ask for 15pc tax gap between listed, non-listed firms

Stock market stakeholders on Thursday demanded a 15 percent gap in corporate tax between listed and non-listed companies in the upcoming national budget to attract healthier firms and increase investment in the bourses.

The gap is 7.5 percent on average currently. The corporate tax rate for publicly listed companies is 25 percent and for non-listed firms 32.5 percent.

A reduced corporate tax rate will encourage multinational and good companies to get listed with the exchanges, said M Shaifur Rahman Mazumdar, chief operating officer of the Dhaka Stock Exchange. He made the statement at a pre-budget meeting with the National Board of Revenue at its headquarters in Dhaka.

He added that if the number of listed companies can be increased, the government's total revenue collection will also go up. Listed companies are required to disclose their financial and corporate governance measures in detail. He also recommended allowing the status of listed companies for firms whose securities are listed on alternative trading boards. The DSE also proposed a reduced tax rate for small and medium enterprises at 10 percent for five years from the date of listing.

Furthermore, the DSE sought to reduce source tax at a maximum of 0.015 percent on the value of the transaction. The premier bourse also proposed to increase investors' tax-free dividend income limit to Tk 2 lakh from the existing Tk 50,000 but it sought to deduct taxes for non-residents. 

A capital gains tax of 15 percent is applicable for non-residents according to section 56(1) of the Income-tax Ordinance. At present, the corporate tax is between 25 percent and 40 percent based on the type of business.

Mazumdar said, “We would like to propose not to apply section 56(1) in case of capital gains on share trading. This will encourage foreign non-residents to invest in the capital market." Md Sayadur Rahman, president of the Bangladesh Merchant Bankers' Association, sought corporate tax cuts for publicly listed companies to 20 percent. He continued to seek a reduction of corporate tax rates for merchant banks by 12.5 percentage points to 25 percent. He also proposed reducing the value-added tax for listed companies by 10 percent.

Tamal Parvez, chairman of NRBC Bank and representative of the Bangladesh Association of Banks, asked for a reduction of corporate tax for banks so that they can spend on social development and increase employment in the country. The DSE and the BMBA also recommended allowing undisclosed money in the capital market until the next fiscal year, taxed at 5 percent.

Md Abdul Khaleque Miah, chief executive officer of Sonar Bangla Insurance and representative of the Bangladesh Insurance Association, said that the corporate tax for non-life insurance firms should be reduced to 35 percent and 30 percent for life insurers. He sought the withdrawal of the 5 percent tax provision on insurance policy benefits of policyholders and removal of 15 percent VAT and 5 percent source tax on agents’ commission.

NBR chief Abu Hena Md Rahmatul Muneem said, “We may not be able to consider all the proposals because of the overall economic circumstances and because the government requires more revenue for development.” The NBR chairman sought assistance from businesses for bringing transparency in revenue collection.