The finance minister's budget for FY27 proposed adopting a digitalised and time-bound initial public offering (IPO) process, but stopped short of offering any new tax incentives to encourage fresh listings - a long-standing demand of market participants.
The country's stock market has seen no new listings for the past two years.
Ahead of the budget, stakeholders had submitted a range of fiscal and policy proposals designed to encourage corporate listings, attract investors and deepen market liquidity.
The Bangladesh Merchant Bankers Association (BMBA), for instance, recommended reducing the corporate tax rate for listed companies to 18 per cent and introducing a 15 per cent tax rate for newly listed firms during their first five years in the secondary market. The proposed budget, however, left unchanged the existing five-percentage-point tax gap between listed and non-listed companies.
The budget falls short of addressing a key stakeholder demand by not offering any tax incentives for new listings, said Sumit Podder, secretary general of the BMBA.
He added, however, that tax benefits alone are not sufficient to attract quality companies to the market. "Fair valuation mechanisms and supportive policy incentives remain crucial for attracting good companies to the stock market," said Mr Podder, who also serves as CEO of MTB Capital.
"Many profitable firms continue to stay away from the market due to concerns over pricing restrictions," he said, adding that firms with paid-up capital above Tk 5 billion, annual turnover over Tk 10 billion, or bank borrowings exceeding Tk 5 billion should be classified as "deemed-to-be listed."
Finance Minister Amir Khosru Mahmud Chowdhury proposed a number of measures viewed as broadly positive for the capital market, including tax reliefs, market reforms and sector-specific incentives expected to support corporate profitability, improve cash flows and encourage investment.
One significant shift in tax administration proposed in the budget is the transformation of tax deducted at source (TDS) from a minimum tax settlement mechanism into an advance tax system.
The move is expected to provide substantial relief to brokerage houses and other businesses that have long faced liquidity constraints due to non-refundable deductions at source.
According to BRAC EPL Stock Brokerage, brokerage firms had been trapped in a liquidity crunch under the previous regime, as taxes deducted at source were treated as final settlements, reducing working capital and limiting operational flexibility. The policy change is expected to benefit stockbrokers, merchant banks, asset management companies (AMCs), the Central Depository Bangladesh Limited (CDBL) and stock exchanges. Market participants believe the impact could become more pronounced over the medium term if new listings increase and secondary market turnover improves.
The minister also outlined a roadmap for introducing T+0 settlement in phases, a move expected to boost market efficiency and liquidity. The budget further proposes allowing foreign investors to repatriate profits and transfer proceeds from shares purchased through non-resident investor taka accounts within one working day.
Mr Chowdhury also proposed static and predictable corporate tax rates for the next five years through 2031, providing businesses with greater policy certainty.
Salim Afzal Shawon, head of research at BRAC EPL Stock Brokerage, said the overall budget framework is supportive of the capital market.
"Banks, telecom operators, pharmaceutical companies, ICT firms, fuel distributors, power companies, electronics manufacturers and automobile producers are likely to emerge as the biggest beneficiaries of the proposed measures.
A major relief for businesses also came through reductions in withholding tax (WHT) and advance income tax (AIT) on various business inputs and essential commodities," said Mr Shawon.
The telecommunications sector received a boost as the budget proposed reducing withholding tax on mobile network services to 10 per cent from 12 per cent and withdrawing withholding tax on revenue sharing and licence fees paid to the telecom regulator. "The measures are expected to improve earnings prospects for listed operators," Mr Shawon added.
The information and communications technology (ICT) sector stands to gain from the government's push for high-speed internet expansion, 5G rollout and a Tk 5 billion startup fund, with broadband and technology-related companies expected to benefit from increased digital infrastructure spending.
Healthcare and pharmaceutical companies emerged as another major winner. The budget prioritised the active pharmaceutical ingredient (API) industry and medical device manufacturing while offering VAT and tax relief on selected healthcare products. Increased public spending on health is also expected to support sector growth.
Fuel distribution and power generation companies are expected to gain from reductions in withholding tax rates on fuel oil supply and electricity purchases, which will improve liquidity and operational cash flows.
The proposed budget further extended VAT exemptions until 2030 for local electronics and appliance manufacturers and maintained protective duties aimed at supporting domestic industries. Automobile and electric vehicle manufacturers also received support through the continuation of VAT benefits and a significant reduction in advance income tax on electric vehicles.
However, not all sectors fared equally well. The tobacco industry may face pressure as the government increased cigarette prices while maintaining high corporate tax rates and surcharges. The introduction of a Track and Trace system is also expected to strengthen tax compliance and curb illicit trade.
The steel sector could also come under pressure following an increase in specific VAT on mild steel products at the production stage, potentially raising costs for manufacturers.
Textile and garment-related companies received mixed signals. While measures to simplify bond issuance are viewed positively, higher duties on certain synthetic fibre inputs may increase costs for some manufacturers.
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