Reducing source tax on dividend income

Almost all listed companies of local origin have been paying a negligible portion of earned net profits as dividends, and transferring major portion of profits to reserve accounts. But multinational listed companies have been paying a major part of earned profits as dividends, and keeping very small portion of earned profits in reserve accounts. As the number of multinational companies as well as shares of those companies is very limited, investors are buying local companies' shares.

The government has been imposing 15 per cent source tax on dividend income when the shareholders do not posses Tax Identification Number (TIN). It has been imposing 10 per cent source tax on dividend income when shareholders have a TIN. The government has declared tax-free ceiling on dividend income for individual at Tk 50,000 but owing to source tax most of the shareholders (small investors) cannot avail that tax-free limit as their dividend income in most cases is less than Tk 50,000 in total. Source taxes are cut by the companies before disbursing dividends.

The government has given tax-free ceiling to encourage people for buying shares. Source tax on dividend income for individual, in my view, is a barrier to that initiative. So, I like to urge the NBR to reduce source tax on dividend income from 10 per cent to 5.0 per cent for TIN holders and from 15 per cent to 10 per cent for those who do not have TIN.

Md Ashraf Hossain,

Middle Bashabo, Dhaka,

[email protected]