Need for incentives for small investors

There is nothing in the proposed budget for fiscal year 2018-2019 that will encourage millions of small investors to purchase shares of listed public limited companies and mutual funds.

Around 35 per cent corporate tax has been imposed on companies not listed with stock exchange and 25 per cent corporate tax on profit of listed companies. The corporate tax imposed in such a way does not encourage board of directors to recommend optimum dividend for shareholders or mutual fund unit holders. The government can still impose low rate of corporate tax on the portion of dividend distributed to shareholders and impose higher rate of corporate tax on retained earnings (profit kept in reserve, not given to shareholders).

For listed bank and non-banking financial institutions, 37.5 per cent corporate tax has been proposed and for non-listed bank and financial institutions proposed corporate tax is 40 per cent. The difference between listed and non-listed companies' corporate taxes is only 2.5 per cent where as, in other cases, the difference is 10 per cent. This small difference will discourage bank and non-banking financial institutions from being listed. The difference should be 10 per cent like other companies in Bangladesh.

Corporate tax on listed companies can be imposed by the government at reduced rate on the portion of profit that is distributed to shareholders and corporate tax on retained earnings. This will ensure more investment by small and medium investors into industries, commercial and service-oriented ventures.

Md. Ashraf Hossain

120 Central Bashabo

Dhaka-1214

[email protected]