Merchant banks, DSE seek money legalisation facility for another year

The Dhaka Stock Exchange (DSE) and the Bangladesh Merchant Bankers Association (BMBA) have sought a one-year extension to the opportunity to invest undisclosed money in the capital market.

The current budget has provided the facility to bring the undisclosed money into the mainstream economy by investing in the capital market after paying a 10% tax.

The organisations have also called for bringing down the tax rate to 5%.

The DSE said if the facility continues the undisclosed money will return to the country's mainstream economy, which will help boost the capital market.

According to the BMBA, the flow of money in the capital market has increased due to the investment opportunities and so it is necessary to continue the facility until 30 June 2022.

The proposal was placed in a pre-budget discussion for the financial year 2021-2022 in the presence of National Board of Revenue Chairman Abu Hena Md Rahmatul Muneem and other revenue officials.

On Thursday, the Bangladesh Association of Banks (BAB), a platform of private bank owners, and the Bangladesh Insurance Association also presented budget proposals.

In his turn, the NBR chairman said, "You have put forward proposals for your respective institutions or sectors but the decision will be taken considering the overall aspect. It may not be possible to accept all your suggestions but the decision will be made after considering the overall aspect.

"We want to ensure transparency in revenue collection. You will cooperate. We are also working to create a comfort zone for taxpayers."

Although DSE, BMBA, and Insurance Association presented written statements, BAB did not put forward any written proposals.

Parvez Tamal, chairman of NRB Commercial Bank, expressed regret for this and asked for two or three days to present a written statement.

He said the private banking sector is associated with the development of the country and the lion's share of the development that has been going on for a decade has been financed by private banks.

"Banks should have made short-term investments but the banking sector has made long-term investments as the capital market is not in such a strong position," he said.

"But the 40% tax imposed on the banking sector is higher than any other countries," he said, without mentioning anything about his demand on tax reduction.

 BMBA's six demands

The BMBA has placed six demands in the budget for the next financial year.

These include setting 10% VAT on listed companies, withdrawal of tax on dividends, reduction of tax on merchant banks to 25% and reduction of existing 0.05% tax on transactions to 0.015%.

Currently, the tax gap between listed and non-listed companies is 7.5%.

Tax is 25% for listed companies but the corporate tax of non-listed companies except banks, insurance, financial institutions, telecom and tobacco companies is 32.5%.

BMBA President Sayadur Rahman said, "I am proposing 20% ​​tax for listed companies. If this is done, the tax collection of the government will not decrease but will increase. Despite the 10% tax gap, multinational companies could not be brought to the capital market. Although more than 1.50 lakh companies are registered in the country, there are only 325 companies listed on the stock exchange, which is very negligible."

At present, the tax rate for merchant banks is 37.50%, for brokers 35% and for asset management companies 15%.

Due to the slowdown in the capital market, Covid-19 and business constraints, most merchant banks are unable to meet their operating costs.

Therefore, Sayadur Rahman recommended reducing the corporate tax rate of merchant banks to 25%.

 DSE's 11 demands  

The Dhaka Stock Exchange has demanded that companies listed on the small-cap board be given a 10% tax rebate for five years, companies listed on the alternative trading board be considered listed on the capital market and tax reduction at source and tax exemption on zero-coupon bonds are maintained for all.

The premier bourse of the country also called for increasing the limit of dividend income from Tk50,000 to Tk200,000, considering source tax as the final tax on dividend income, fixing the tax at 10% instead of 20% on dividend income, increasing the tax gap between listed and non-listed companies to 15% from the existing 7.5%.  

The DSE has demanded clarification of gain tax for non-residents and exemption of stock dealers from tax on share transactions.

 Insurance Association's demand 

The Bangladesh Insurance Association has called for setting the corporate tax at 35% for non-life insurance companies and 30% for life insurance companies without keeping it equal to that of bank companies.

It also demanded the withdrawal of 15% tax at the source against the reinsurance commission, withdrawal of 5% gain tax on profits of life policyholders and suspension of provision for payment of 5% advance tax to insurance agents for two financial years.