Allow black money investments in stocks: CSE, BMBA

The Chittagong Stock Exchange and the Bangladesh Merchant Bankers Association (BMBA) on Sunday called for allowing investments of undisclosed money in the country's capital market with a 5% tax payment.

In a pre-budget discussion organised by the National Board of Revenue (NBR) on Sunday, the market stakeholders said that no question could be raised if such an opportunity was given to investors.

They also proposed to increase the difference in the corporate tax rates between the listed and unlisted companies from 7.5% at present in the budget for fiscal 2023-24.  

The Dhaka Stock Exchange (DSE) and the BMBA proposed to increase the tax rate difference to 12.5% and 15%, respectively.

The BMBA said that if this is done, the government's total tax collection will increase. There are many good institutions that are benefiting differently without being listed. If these institutions are listed, the revenue will increase.

Current tax incentives have not attracted multinationals and established companies. These institutions get bank loans very easily, so the 7.5% tax benefit does not attract them.

The stock exchanges proposed to make income from other bonds and government securities tax-free, like zero-coupon bonds.

They said currently, the size of the corporate bond market is very small, which creates different limitations in the capital market as well as the money market. A vibrant bond market may help the economy in different ways. Allowing tax exemptions for all types of bonds will aid in the development of a thriving bond market.

The Chittagong Stock Exchange sought the withdrawal of tax at source on dividends paid by listed companies in the upcoming budget.

According to the CSE, tax is currently deducted at source on dividends received by investors with TINs at 10% and those without TINs at 15%.

In the case of institutional investors, the rate of tax deduction at source is 20%.

This provision creates double taxation. Because listed companies first pay income tax to the government on their profits. Deduction at source on dividends declared against the same income means paying tax twice on the same income, the exchange added.

The DSE has proposed to reduce the rate of tax deduction at source from 20% to 10% for institutional investors.

Companies listed on the SME platform in the stock market are proposed to be exempt from tax for the first three years and then set it at 10 to 15%.

The stock exchange said that if these companies are listed, the number of public limited companies will increase, which will lead to an increase in revenue.

It has been recommended by the CSE to increase the tax-free dividend income limit from Tk50,000 to Tk1 lakh and the tax-free personal income limit from Tk3 lakh to Tk4 lakh.