The National Board of Revenue (NBR) has decided to offer full tax exemption to the country's bourses on their income for 2015-16 to facilitate ongoing reform activities and infrastructure development of the capital market.
For the current fiscal year (FY), the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) will enjoy 100 per cent tax exemption on their annual income.
As per income tax rules of the NBR, some 20 per cent annual income of both the bourses was to come under income tax net from the current FY.
The NBR, in a recent board meeting chaired by its Chairman Md Nojibur Rahman, decided to allow the DSE and the CSE full tax waiver following their requests to the Finance minister.
The Bangladesh Securities and Exchange Commission (BSEC) has also recommended to the tax authorities to offer full tax exemption to the two bourses for current FY.
Earlier, Finance Minister AMA Muhith instructed the board to scrutinse the applications of the DSE and the CSE following recommendations of the stock market regulator.
Under the existing income tax ordinance, the bourses were to come under diminishing tax rate, 7.0 per cent corporate tax, from the current FY.
Earlier in a letter, DSE Managing Director Dr Swapan Kumar Bala said tax exemption for the current year will help the bourses to continue the pace of ongoing reform activities under the demutualisation scheme.
There should not be any concern of revenue loss with the tax exemption as the authority currently is not receiving any corporate income tax from the bourses, he said.
The DSE MD pointed out that revenue collection will not be affected with the waiver of tax from the stock exchanges.
Imposition of income tax on earnings of the stock exchanges will cause downward trend of net income of the stock exchanges.
Thus Earning Per Share (EPS) will be directly affected and net asset value will be declined.
Prices of own shares of the stock exchanges may go down that will also leave negative impact on existing tax collection of the NBR at a rate of 15 per cent on capital gain earned through sales of own shares of the bourses.
The bourses were scheduled to come under diminishing rates of income tax from the current FY after enjoying full tax waiver until 2014-15.
With the latest decision of the NBR, the DSE and the CSE will have to pay income tax from 2016-17 as they will be allowed to enjoy tax exemption for the current FY.
The country's bourses came under tax net like other private bodies after demutualisation.
As per income tax ordinance, the DSE and the CSE would pay tax on total income in phases.
The stock exchanges would enjoy diminishing rates for next four years instead of payment of taxes on their full income.
According to the latest decision, the bourses will have to pay tax on their total annual incomes from FY 2020-21.
The NBR will issue an order shortly for making the tax exemption effective for FY 2015-16.
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