• Monday, Dec 06, 2021
  • Last Update : 01:15 am

Who will benefit from Sukuk tax rebate?

  • Published at 04:48 pm October 21st, 2021
Climate Tribune_Green Sukuk_Pg 20 & 21
Courtesy

Although the state will lose revenue, the government thinks that the tax rebate facility will enhance the interest of ordinary consumers in such Islamic bonds


  • Bangladesh Bank has released Sukuk worth Tk8,000 crore
  • Beximco has Green Sukuk worth Tk3,000 crore in the stock market

The Bangladesh government is thinking of giving a tax rebate facility on the Islamic financial certificate, Sukuk bonds.

But before offering this facility, analysts say the distribution system should consider the preference of ordinary consumers.

Otherwise, only the big companies will benefit from this bond system of the government.

Although the state will lose revenue, the government thinks that the tax rebate facility will enhance the interest of ordinary consumers in such Islamic bonds.

Consumers currently have the opportunity to invest in Sukuk bonds in two ways. Either directly from Bangladesh Bank or from the capital market.

AB Mirza Azizul Islam, economist and former financial adviser to a caretaker government, told Dhaka Tribune: “Sukuk bonds are a good initiative of the government for Islam-based investors. The government is raising money and investing in other things from there”.

“When Bangladesh Bank left Sukuk, we saw a good deal of interest among the big companies there. However, there is not much interest in Sukuk in the stock market. Let's see how the government's decision affects its sales in the stock market,” he added.

When asked about the government's tax rebate facility, he said that big companies were interested in the bonds issued by Bangladesh Bank. Now the big companies will benefit if the tax rebate facility is given there too.

“So, I think Sukuk should be given tax exemption after considering the two markets since the issue of state revenue is involved here,” Mirza Azizul further said.

When asked about government authorised Sukuk bonds, Sirajul Islam, executive director and spokesperson of Bangladesh Bank said that investing in bonds is considered risk-free.

“But investors of Islamic thought did not have the opportunity to invest that way here. So, the government has withdrawn money from the market by issuing Sukuk bonds worth Tk8,000 crore in two phases. It is not possible to say who bought those bonds without looking at them,” he added.

According to Bangladesh Bank sources, the withdrawn money is being invested in the government's water purification project.

Its profit rate is 4.69%. Ordinary investors can also invest in these bonds. However, they have to buy at least Tk10,000 worth of bonds.

Meanwhile, for the first time, Beximco released Sukuk bonds worth Tk3,000 on the stock market. But there was no big response.

The application for this bond started on August 16 this year. But due to lukewarm response, the application time was extended in two stages. It ended on September 30.

Investment Corporation of Bangladesh is the trustee of these bonds while City Bank Capital Resources and Agrani Equity and Investment are the issue manager.

When asked about Sukuk bonds of Beximco, Shibly Amran, chief operating officer of City Bank Capital Resources said that they have received proposals for bonds worth Tk1,777 crore so far. This is 59.23% of the total bond amount.

The issue date will be disclosed once they receive proposals for the entire Tk3,000 worth of Sukuk bonds.

Earlier, during a Cash and Dataset Management Committee (CDMC) meeting of the Finance Department, it was decided that a letter would be sent to the NBR in this regard. The letter will mention that the "Sukuk bonds would be considered government security."

Abdur Rauf Talukder, senior secretary of the Finance Department presided over the meeting, where it was also decided that VAT on Sukuk would be removed to attract investment.

Requesting anonymity, an NBR official said that they received the letter and are now reviewing the decision by the CDMC.

“Since the imposition and withdrawal of taxes is the jurisdiction of the parliament, if we want to say something about it, we have to wait till the next budget,” the official said.

Banks are free to invest in Green Sukuk bonds

Bangladesh Bank has allowed all scheduled banks to invest in private Green Sukuk bonds from their special funds meant for investment in the stock market.

It said the issuer of Sukuk will need to invest 70% of Sukuk in wind power, solar power, hydropower, and renewable energy generation.

The Sukuk needs to be listed or committed to be listed within one year of subscription, the central bank said in a circular issued on September 27.

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