The Bangladesh Merchant Bankers Association (BMBA) urged the National Board of Revenue (NBR) for a scope to invest undisclosed money in the capital market with a 5.0 per cent tax to increase the depth of the market.
The merchant bankers also urged to widen the tax-rate gap at least 15 per cent between listed and non-listed companies to attract more large companies to the capital market.
The BMBA submitted their budget proposals, made for the fiscal year 2023-24, to the chairman of National Board of Revenue (NBR) on Sunday.
Currently, listed firms other than banks, insurers, financial institutions, mobile operators, and tobacco companies, which issued shares worth more than 10 per cent, pay 20 per cent corporate tax while their non-listed competitors pay 27.50 per cent tax.
The rate is 22.5 per cent for the listed firms that floated shares equivalent to 10 per cent or less of its paid-up capital. The tax rate would be 25 per cent instead of 22.5 per cent if companies fail to meet conditions.
“More non-listed companies will be inspired to go public if the amount of corporate tax is reduced. The government’s revenues will be increased at this,” it said.
The BMBA noted that out of nearly 0.2 million registered companies, only 354 are now publicly listed.
BMBA’s argument in this regard is that many good companies are not coming to the capital market due to the small tax gap, they are doing business with bank loans.
There are some additional costs involved in getting to the capital market, so there is a need to raise the corporate tax gap, it said.
“The NBR would be able to bag more revenue despite the proposed cut in taxes if more large companies come to the capital market,” the proposal reads.
The association also called for reducing the tax rate of merchant banks from 37.5 per cent to 25 per cent like that of a company.
There are 67 merchants operating in Bangladesh and they are going through a tough time and most of them could not maintain operating costs due to the slow trend of the stock market. So 37.5 per cent tax rate for merchant banks like other large corporations is illogical and tough for surviving, reads the proposal.
The BMBA called for the 15 per cent dividend tax on individual investors as their ultimate tax liabilities. Currently, tax on dividends is being deducted at sources. Again, the taxpayers need to pay income tax for the dividends, in case of each annual dividend income crossing Tk 50,000.
This is a double taxation and the BMBA urged for total waiving of the tax on dividend for long-term investment and to make the stock market vibrant.
The merchant bankers also urged to reduce the value added tax to 10 per cent for listed companies from existing 15 per cent. Presently, VAT rate for listed and non-listed companies is the same.