The country’s two stock exchanges have urged the National Board of Revenue to continue exempting tax on their profits for at least five years more along with other tax benefits.
The representatives from Dhaka Stock Exchange and Chittagong Stock Exchange made the call at a pre-budget meeting with NBR held yesterday in the capital.
Despite demutualization of the bourses, they said the tax benefits would be used for meeting implementation and training cost for introducing different product lines such as derivatives and equities to generate even higher taxable income in the near future.
“Stock exchanges in the neigbouring countries are generating a substantial income from its products other than equities and therefore we must build our capacity for such a market for the sake of future benefits,” said Syed Sajid Husain, managing director of Chittagong Stock Exchange Ltd.
In addition, the exchanges demanded one-time exemption of unrealised capital gain tax of shares issued to the initial shareholders on demutualisation and to impose tax only when the shares are sold.
All the TREC holders are given shares having a value of Tk10 each of the exchanges totalling above Tk4 crore. The shares given to the TREC holders make up 40% of the exchanges while the rest can be sold to strategic investors.
“We are looking for such investors but it’s unlikely to find a match for the current market and also the time to be taken for such a deal is a factor to be considered as well,” answered Sajid Husain to a question asked by Dhaka Tribune on the sidelines on using the sale of shares to strategic investors for funding the new line of products rather than tax holiday.
The NBR chairman Md Ghulam Hussain requested the companies to be more willing to make higher contribution to the country’s source of funds, considering the contribution and benefits they had been given in the recent years for stabilising the market.
Among the other mentionable demands, the bourses urged the government to allow income tax credit of 50% instead of current 15% to new small investors who invest up to Tk1 lakh in the market and has an annual income of below Tk15 lakh with a three-year lock-in period.
“Such investors make up most of the market, and high importance, therefore, should be placed on their benefits,” said Professor Dr Swapan Kumar Bala, CEO of Dhaka Stock Exchange Ltd.
The stock exchanges demanded increasing exemption limit of dividend income from Tk10,000 to Tk50,000 and corporate capital gain tax on securities trading at varying rates of as high as 5%, based on holding period rather than the existing 10% single rate.
The bourses also urged to make collection of tax from TREC - trading right entitlement certificate holders (formerly known as members) - of the stock exchanges 0.015% replacing 0.05%.
The initially set tax on trading was 0.0125%, which was raised to 0.05% based on the increase of trades a few years back and therefore the rate should be reduced considering investors’ participation in the current market, said Ruhul Amin, independent director of Dhaka Stock Exchange.
Representative from Central Depository of Bangladesh Ltd (CDBL) also attended the meeting.