The securities regulator has recommended making tax-exemption facility available for all investors in all types of bonds to help encourage mobilisation of funds from the capital market for the sake of the country's industrialisation.
The Bangladesh Securities and Exchange Commission (BSEC) has made the suggestion in a recent letter to the chairman of the National Board of Revenue (NBR).
Currently, individual investors other than banks, insurers and financial institutions are entitled to have tax waiver on the income gained from investments in zero-coupon bonds.
However, none is tax-exempt from the income realised from the investments in other types of bonds.
So, a large number of investors are not encouraged to invest in bonds while the issuers are also less interested in raising funds through such instruments.
Keeping this in view, the BSEC has suggested ensuring tax waiver for all investors, including banks, insurers and financial institutions, on their income generated from investments in all bond types.
BSEC spokesperson Mohammad Rezaul Karim says one of the key barriers of the bonds is the issuers' less interest amid a poor rate of returns from such debt instruments.
"Issuers will be encouraged to issue bonds on a large scale if there is a high rate of returns from bonds. Then companies will be interested in raising funds issuing bonds without taking bank loans."
Mr Karim says the tax-waiver recommendation is for the sake of the bond market and investors as well.
The BSEC letter highlights that some amendments are needed in the bond-related sections of the Income Tax Ordinance-1984.
"If the recommendations are considered, it'd encourage mobilisation of long-term funds from the capital market for industrialisation purposes, thus augmenting the country's overall economic development through generating more job opportunities."
The overall revenue income of the government would also be enhanced at this, according to the letter.
The BSEC also recommends revising the definition of publicly traded companies, registered in Bangladesh under the Companies Act 1994, replacing the word 'share' by the 'securities'.
Targeting the bond market's development, the regulator has been approving different types of bonds after the incumbent commission took charge in May 2020.
In 2021, the BSEC allowed 23 companies to raise Tk 125.73 billion through bonds having different characteristics and sukuk, a bond-like instrument.
The characteristics of the bond approved by the BSEC include zero coupon, perpetual and coupon-bearing bonds, fully redeemable, convertible.
The regulator has also approved a green bond. It is also interested in allowing municipality bond and one proposal is also under process. The revenue board has already offered tax incentives for investments in sukuk.
