BSEC seeks wholesale money whitening scope for stock investment

Undisclosed money holders should get a wholesale opportunity to legalise their dirty money through an investment in the stock market, subject to paying only a flat 5% tax, according to a proposal by the Bangladesh Securities and Exchange Commission (BSEC).

The commission also does not want the black money owners facing any questions about their sources of income. 

The stock market regulator recently sent a letter to the National Board of Revenue (NBR) for incorporating such a provision into the draft "Income Tax Law-2022".

In the existing law, there is no wholesale scope of whitening undisclosed money in any sector. Instead, the government in the annual national budget every year offers opportunities for an investment of black money in various sectors, such as the stock market, economic zones, industrialisation in rural areas and the real estate sector, for a certain period but with some conditions attached.

BSEC Chairman Professor ShibliRubayat-Ul-Islam told The Business Standard, "Undisclosed money is constantly being siphoned off the country. We want such money to be invested in the country for its development. That is why we have proposed incorporating this provision in the income tax law." 

"I hope that the NBR will agree to this proposal," he added. 

In the current fiscal year's budget, the government has offered the scope for investment of untaxed money in certain sectors, including the stock market, subject to paying regular tax plus an additional 5% fine.

In July-September this fiscal year, 122 people whitened their black money amounting to Tk15 crore by cashing in on the opportunity made available. Only one of them invested Tk3 lakh in the stock market. A year ago, black money owners got an opportunity to legalise their dirty money by paying a 10% flat tax in almost all sectors. As many as 286 people invested Tk400 crore in the stocks.

In the letter sent to the revenue board on 12 January, the BSEC also made some other specific proposals for inclusion in the draft income tax law.

To popularise the bond market, the securities regulator proposed reducing tax on income from bonds and "Sukuk" and the exchange traded fund.

The BSEC also recommended cutting tax on dividend income to 5% from the existing 10% in the case of general investors having a tax identification number (TIN). Those without TINs will pay 10% instead of 15%.

The tax-free dividend income threshold for shareholders of listed companies should be raised to Tk1 lakh from Tk50,000, the commission said.

The BSEC also suggested fixing tax on buying and selling of sponsor shares of all companies at 1% instead of the current rate of 5%, while it sought tax exemption on trading of government securities.

Dr Shaikh Shamsuddin Ahmed, commissioner at the BSEC, told TBS that calculating the taxes of listed companies as per existing income tax law is very complex. In some cases, they need to face double taxation. Investors also pay taxes twice. 

"We have identified such issues and given our opinion on the proposed income tax law accordingly," he noted.

If the proposals are accepted, it will be possible to build a modern and diversified capital market, he added.