Neglecting capital market in proposed budget inapt: Planning minister

Major demands

• Tax exemption on interest income from bonds
• Tax gap increase between listed and non-listed firms
• Undisclosed money be allowed for stock market investment
• Treatment of tax at source on dividend income as full and final settlement
• Deduction of tax at source for stock exchange trackholders
• Tax waiver for SME companies for first three years since listing

Overlooking the capital market in the proposed national budget for fiscal 2023-24 was incorrect, as it can serve as a significant source of capital supply in developing economies like Bangladesh, Planning Minister MA Mannan has said.

Speaking at a post-budget discussion on Sunday, he assured stakeholders that he would advocate in parliament for the withdrawal of advance income tax (AIT) to promote investment in the capital market.

"I will present your proposals to the government regarding the withdrawal of the double tax policy and the widening of the tax gap between listed and non-listed companies.

"If you submit these proposals in writing, I will forward them to the government for consideration," Minister Mannan said after listening to stakeholders' concerns at the event – jointly organised by the Capital Market Journalists' Forum (CMJF) and the Bangladesh Merchant Bankers Association (BMBA) at the CMJF auditorium in the capital.

Representatives from the capital market and related organisations expressed disappointment during the discussion, as the proposed FY24 budget did not include any provisions for the capital market.

They reiterated their demands previously presented to the government during pre-budget discussions, highlighting the sector's neglect.

Minister Mannan mentioned that the need for AIT no longer exists, considering the improved efficiency of the National Board of Revenue (NBR), technological advancements, and a stronger business community. He added that the tax could be removed after thorough discussions with all relevant authorities.

The minister further emphasised the need to exert more pressure to ensure multinational companies are listed on the capital market.

BMBA President Sayadur Rahman delivered the opening speech during the discussion, moderated by CMJF General Secretary Abu Ali.

Currently, listed and non-listed companies are subject to tax rates of 20% and 27.5% respectively, representing a tax gap of 7.5 percentage points. However, sectors such as banking, insurance, financial institutions, telecom, and tobacco are exempt from this regulation.

Sayadur Rahman expressed that the mere 7.5-percentage-point tax gap does not incentivise companies to get listed on the capital market.

He demanded a wider tax rate difference between listed and unlisted companies in the proposed budget.

Additionally, he called for the withdrawal of double taxation on dividends, consideration of advanced final tax on bonds, and a reduction in transaction tax from 0.05% to 0.015%.

He also argued that including bonds and mutual funds in the capital market exposure would contribute to its development.

Hafiz Muhammad Hasan Babu, chairman of the Dhaka Stock Exchange, highlighted the potential of the capital market to become the main driving force of the country's economy.

He stressed the importance of policy support from the government, as it could enable the capital market to offer significant opportunities and generate substantial revenue.

Asif Ibrahim, chairman of the Chittagong Stock Exchange (CSE), emphasised that banks are not suitable for long-term investment, making the capital market the only viable alternative.

Richard De Rosario, president of the DSE Brokers Association (DBA), stated that as a developing country, the nation risks missing out on many opportunities while enjoying certain privileges.

Focusing on small companies and providing them with opportunities to raise capital is crucial for making the country's economy dynamic, he observed.

CMJF President Ziaur Rahman remarked that the budget is not just an income-expenditure account but is determined by political philosophy.

He expressed concern that the capital market's exclusion from the budget sends a negative message to investors, indicating a lack of priority for its development. He hoped that the proposed budget discussion would address this concern.

"To achieve the vision of a Smart Bangladesh, we cannot rely solely on the traditional financial sector as a source of financing," concluded Ziaur Rahman.