In a pre-budget discussion with the National Board of Revenue (NBR) for the upcoming FY24, the Bangladesh Merchant Bankers Association (BMBA) asked for a facility to invest undisclosed money with a 5% tax to widen the stock market.
The BMBA submitted their budget proposals to the chairman of NBR on Sunday.
The merchant bankers also urged to widen the tax-rate gap by at least 15% between listed and non-listed companies to attract larger companies to the capital market.
Currently, listed firms other than banks, insurers, financial institutions, mobile operators and tobacco companies, which issued shares worth more than 10%, pay 20% corporate tax while their non-listed competitors pay 27.5% tax.
The rate is 22.5% for the listed firms that floated shares equivalent to 10% or less of their paid-up capital. The tax rate would be 25% instead of 22.5% if companies fail to meet conditions.
Regarding this, they said: “More non-listed companies will be inspired to go public if the amount of corporate tax is reduced. It will increase the government's revenues.”
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 instead.
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 proposal reads that the NBR would be able to bag more revenue despite the proposed cut in taxes if more large companies come to the capital market.
However, BMBA noted that out of nearly 0.2 million registered companies, only 354 are now publicly listed.
The association also called for reducing the tax rate of merchant banks from 37.5% to 25% like that of a company.
The BMBA called for the 15% 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 each annual dividend income crosses Tk50,000.
This is double taxation and the BMBA urged for total waiving of the tax on dividends for long-term investment and to make the stock market vibrant.
Presently, the VAT rate for listed and non-listed companies is the same. Mentioning this, merchant bankers also urged to reduce the value-added tax to 10% for listed companies from the existing 15%.
