In a bid to lure multinational and large corporate companies into enlisting in Bangladesh’s stock exchanges, stakeholders are seeking a cut in the corporate tax rate for publicly listed companies in the upcoming budget for the 2018-2019 fiscal year.
The supply of quality shares plays an important role in providing a much needed lift to the ailing stock market and attracting new investment to the capital market.
Policy incentives could encourage multinational companies (MNCs) to be listed in stock markets, stock analysts and stakeholders say. Currently, publicly listed companies pay a minimum of 25% and a maximum of 45% tax based on their business category.
As per the present tax policy, publicly listed banks, insurance, and non-banking financial institutions pay 40% corporate tax, while non-listed companies pay 42.5%.
Cigarette manufacturers and mobile phone operators currently pay 45% corporate tax.
Excluding these sectors, other publicly traded companies pay 25% corporate tax, while non-listed companies pay 35%.
Companies listed with stock exchanges enjoy a 10% rebate compared to non-listed companies.
In the upcoming budget, stock market stakeholders urged the government to increase the existing rebate rate from 10% to 15%.
They also urged the government to reduce corporate tax for publicly traded companies from 25% to 15%. The stakeholders argued that if the government cuts corporate tax for the publicly traded companies, it would encourage more multinational companies and large corporate firms to enlist in the stock market, and the stock exchanges would turn into a viable source for raising funds.
In recent years, the trend of raising funds through the stock market has seen a decline.
In 2017, the Dhaka Stock Exchange (DSE) saw a sharp decline in fund raising using Initial Public Offerings (IPO), as it dropped by 74.18% to Tk219.25 crore.
In its budget proposal, the DSE urged the government to increase tax-free dividend income to Tk1 lakh from the existing TK 25,000, and to reduce tax at source on share transactions to 0.015% from the existing 0.05%.
Meanwhile, the Bangladesh Leasing and Finance Companies Association (BLFCA) demanded the reduction of the corporate tax RATE for publicly traded companies to 25% from the existing rate of 40% in its proposal.
BLFCA also recommended that the corporate tax rate for the non-listed companies be reduced from the existing 42.5% to 35%.