According to DSE data, there are now 30 listed bank companies. Among them, 29 banks have excess reserve over 50% of their capital
Listed banks with Dhaka Stock Exchange (DSE) will have to pay Tk2937.2 crore in taxes if the proposed 15% tax on excess reserve exceeding 50% of a company's paid up capital is passed in parliament.
According to DSE data, there are now 30 listed bank companies. Among them, 29 banks have excess reserve over 50% of their capital, equivalent to Tk 18,443 crore.
On June 13, Finance Minister AHM Mustafa Kamal placed the national budget proposal for FY2019-20 before the parliament. Mustafa Kamal proposed a 15% tax on the excess reserve of a publicly traded company exceeding 50% of its paid up capital.
Another 15% tax on stock dividend was also proposed in the budget.
Stakeholders and experts have demanded the government scrap the proposed tax on retained earnings and reserve, saying the move would harm share market stakeholders.
Meanwhile, Bangladesh Association of Publicly Listed Companies (BAPLC) and Metropolitan Chamber of Commerce and Industry (MCCI) expressed their grave concern over the 15% tax on the reserve and stock dividends, urging the government to revise the policy.
If the budgetary measure on excess reserve is implemented, Islami Bank Bangladesh Limited, the largest private sector bank in the country, has to pay Tk398 crore in taxes, as the bank has Tk3,456 crore in excess reserves as of yesterday.
Paid up capital of Islami Bank is Tk1,610 crore.
On the other hand, Dutch-Bangla Bank has to pay Tk279 crore followed by AB Bank with Tk189 crore, Uttara Bank Tk118 crore, and Brac Bank has to pay Tk193 crore in taxes.
Pubali Bank has to pay Tk176 crore for extra reserve, Eastern Bank Tk168 crore, City Bank Tk152 crore, Southeast Bank Tk150 crore, UCB Tk144 crore, Prime Bank Tk121 crore, Exim Bnak Tk97 crore, Bank Asia Tk86 crore, Mercantile Bank Tk80 crore, Al-Arafa Islami Bank Tk76 crore and Dhaka Bank Tk67 crore.
Seeking anonymity, managing director of a listed bank told Dhaka Tribune: “The proposed tax imposition on reserve and retained earnings of listed companies is illogical. The policy should be scrapped for the sake of a vibrant capital market.”
Dhaka Stock Exchange (DSE) Director Minhaz Mannan Emon also demanded a review of the proposed taxation.
“We will discuss the tax issue with the regulators,” Emon told Dhaka Tribune.
MCCI‘s Vice-President Golam Mainuddin said: “Imposition of tax on equity is wrong in principle. Also retained earnings are made up of taxed income, therefore this is double tax on the same income. This will discourage capital creation and reinvestment. We strongly urge the government to reconsider this proposal.”
“The reserve money of a firm does not belong to the board of directors only, but to all shareholders. Therefore, imposing a tax on the reserve will affect all shareholders. The government should refrain from imposing such taxes,” stock market expert and former Dhaka University teacher Professor Abu Ahmed told Dhaka Tribune.
Another expert and United International University professor Mohammad Musa said that the market reacted negatively after the proposed budget was placed as it was evident that investors rejected the tax measures for the listed companies.
On Sunday, NBR Chairman Mosharraf Hossain Bhuiyan at a seminar said that it would review the proposed imposition of 15 per cent tax on reserve and retained earnings of listed companies.