The Bangladesh Securities and Exchange Commission (BSEC) has written to the National Board of Revenue (NBR) to give a five-year tax holiday facility to reputed foreign companies if they relocate to Bangladesh and get listed on local bourses.
The letter was given to the NBR chairman when top BSEC officials met him in person last week.
It said a trend is apparent that many industries and investments are relocating from various countries, predominantly China and Hong Kong, to other countries because of various global issues.
Bangladesh can take the opportunity, and the BSEC is requesting granting the companies a five-year tax holiday if they come here with prior approval from the commission and get listed on the local stock exchanges.
Besides, if any of those companies sets up its factory in an export processing zone or special economic zone here, the tax holiday should surpass the existing benefits offered, suggested the capital market regulator, citing that it would help create employment and benefit many local institutions including the capital market.
Professor Shibli Rubayat-Ul-Islam, the BSEC chairman, told The Business Standard,"We have special economic zones and export processing zones that offer facilities and incentives. Any manufacturing brand can avail them."
The BSEC is tracking some global giants in industries like construction and agriculture that are relocating business from other countries. They operate in industries which are beyond the traditional recipient sectors of foreign direct investments in the special economic zones here.
"By offering some incentives, if we can attract some of those companies and they get listed on our bourses, that would be a boost to the economy and the capital market as well," said Professor Shibli.
His commission is also working with a view to letting the market attract portfolio investors, mainly from bond investment funds from the Middle East that could help local infrastructure financing.
Experts have long been suggesting fiscal and other incentives to inspire issuance of and investments in bonds.
"We tried to convince the government that if business grows, tax incentives will result in higher revenue ultimately, despite reduction in tax rates. On the other hand, in case of low investment and insufficient business, higher tax rate will not contribute to higher national revenue," said Professor Shibli.
The BSEC has also requested the NBR to withdraw the planned three-year lock-in period if undisclosed money is invested in the capital market as other asset classes are not subject to any such restriction.
Alongside, the BSEC prescribed reduction in wealth whitening tax to 7 percent in case of capital market investment, which was proposed to be 10 percent for other assets, including deposit and savings schemes, and cash.
Capital market professionals in their budget reaction have said that stock market investment involves some risk, and to attract investment here, money whitening tax should be lower than other safer options.
In the proposed budget, the government has announced reducing corporate tax by 2.5 percentage points for non-listed companies only, which drew criticism from market groups as that would narrow corporate tax rate gap between listed and non-listed companies instead of widening the difference as suggested for encouraging listing of profitable businesses.
The BSEC requested the NBR to reduce listed companies' corporate tax too by the same 2.5 percentage points.
The capital market regulator, before the budget proposal, requested the government to extend the tax waiver facility on income or discounts from zero coupon bonds for all types of bonds. The NBR instead cancelled the existing one for zero coupon bonds.
The BSEC re-communicated its request to offer incentives for all the bonds.
It made a significant proposal to popularise bond issuance as a better alternative to bank loan-dependent financing of long-term projects. It proposed a corporate tax cut by 5 percentage points if half of a company's long-term debts are in bonds.
However, the proposal remained unaddressed.
In the letter, the BSEC also conveyed some requests of capital market groups. Those include reducing merchant banks' corporate tax to 32.5 percent from 37.5 percent, increasing tax-free limit of local individuals' annual dividend income to Tk150,000 from the existing Tk50,000, and reducing brokerage firms' advance income tax deducted from commission income to 0.015 percent from 0.05 percent.