DSE proposes tax exemption on first Tk50,000 of dividend income
Proposals were placed at a pre-budget discussion with NBR
Other proposals:
- Reduction of tax at sources for the TREC holders
- Reduction of the corporate tax rate for listed companies
- Exemption of tax on interest earnings from listed bonds
- Exemption of tax for SMEs and ATB companies for three years
The Dhaka Stock Exchange (DSE) has proposed tax exemption on the first Tk50,000 of dividend income considering the present market scenario.
The tax exemption will help attract small investors to invest in the capital market that will ultimately ensure sustainable development of the country's economy, said the DSE in a pre-budget discussion for the fiscal year 2024-25 with the National Board of Revenue (NBR) held in Dhaka on Tuesday.
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The Chittagong Stock Exchange (CSE), the Bangladesh Merchant Bankers Association (BMBA) and the DSE Brokers Association also attended the discussion.
ATM Triquzzaman, managing director of DSE, said the capital market is facing a serious liquidity crisis. "Post-Covid pandemic made the situation more vulnerable. If the provision as proposed is taken into consideration, it will boost the confidence of the general investors and help reduce the liquidity crisis of the capital market to some extent."
The DSE in its proposal said the corporate tax rate difference between listed and non-listed companies should be elevated to 12.5% instead of 7.5% which will influence more multinational and well-regarded local companies to be listed on the stock exchange.
The DSE also proposed exemption of tax on interest earnings from listed bonds. Presently, the size of the corporate bond market is very small, which creates different limitations in the capital market as well as the money market, said the DSE MD.
"A vibrant bond market may help the economy in different ways. If tax exemption is allowed for all kinds of bonds, it will encourage the establishment of a vibrant bond market," he said.
ATM Triquzzaman proposed reduction of tax at sources for the TREC holders of stock exchanges citing it a vital issue now, as most brokerage houses are facing tough times.
The stock exchanges collect a tax of 0.05% on the value of securities transacted at the time of payment for such a transaction, he said, adding that the tax rate is significantly higher than in our neighbouring countries.
The tax rate in India is 0.013%, while 0.02%, in Pakistan and 0.0027% in Hong Kong, the DSE MD said.
"Therefore, it is also justifiable to reduce the tax deduction rate in line with international best practices," he said.
The DSE MD further said, "Besides, the main revenue of TREC-holder companies is commission income. If tax is charged at such a high rate, it is difficult for them to survive and to contribute to the capital market. Considering this, the tax rate should be reduced to 0.020% from the existing tax rate of 0.05%."
Chittagong Stock Exchange MD Shaifur Rahman Mazumdar proposed that the exemption of tax for SMEs and ATB companies for three years is needed so that they can contribute significantly to the economy.
