The DSE Brokers Association of Bangladesh (DBA) has made a set of proposals, including withdrawal of double taxation system, in the national budget for the upcoming FY27 to ensure stability, investment growth and long-term growth in the country's capital market.
On Wednesday (April 1), the organization's president Saiful Islam outlined these proposals in a letter sent to National Board of Revenue (NBR) chairman Md. Abdur Rahman Khan.
According to the DBA, if the proposals are implemented, stability and sustainable growth will be ensured in the capital market.
In addition, the listing of new companies will increase, domestic and foreign investment will increase and investor confidence will be strengthened, which will also have a positive impact on the overall economy.
The organization's proposal states that currently after deducting tax at source on dividend income, individual investors have to pay tax again in their income tax returns. In many cases, the effective tax rate reaches 40.5%.
As a result, sponsors-managers are being discouraged from declaring cash dividends and high net worth investors are also moving away from dividend-based investments.
In this situation, the DBA has proposed to consider tax deducted at source on dividends as the final tax liability for individual investors.
The organization believes that this will simplify the tax structure and reduce the burden of double taxation.
The DBA also emphasized eliminating the existing tax disparity in the mutual fund sector.
Currently, there is a maximum investment limit of Tk5 lakh in mutual funds for tax concession benefits, which is discouraging retail investors.
It has been proposed to remove this limit and bring any amount of investment under tax concession. According to the organization, this will increase institutional investment and ensure stable fund flow in the market.
In addition, although listed securities have a tax rate of 15% on capital gains, different tax rates apply to mutual funds and other securities, which has created inequality in investment.
The DBA also proposed to fix the same tax rate for all listed securities and fund units by removing this disparity.
The DBA also said that since tax deducted at source (TDS) on share transaction turnover is currently considered as minimum tax, brokerage houses have to pay tax even if they make a loss.
It has been proposed to change this situation and treat TDS as advance tax instead of minimum tax, so that there is an opportunity to adjust the tax according to the actual income.
The organization has also proposed to provide tax exemption on negative equity accounts in order to rehabilitate investors who have suffered losses.
In this case, it has been recommended to provide full tax exemption on interest waiver, cash dividends and capital gains, and to remove the existing limit of Tk10 lakh. The DBA believes that this will allow affected investors to become active in the market again.
It has also proposed to introduce a 'deemed-to-be listed company' structure to increase the participation of large companies in the capital market.
It has been mentioned that companies with a certain amount of capital, turnover or bank loans can be brought under this framework. In addition, the organization has recommended providing policy incentives under certain conditions to encourage fund raising through bond issuance.
Meanwhile, the DBA has also proposed to abolish tax benefits for inactive listed companies to restore order in the market.
It has been recommended to set a flat tax rate for unlisted companies that have not held an annual general meeting (AGM) or declared dividends for three consecutive years.
