Both market operators and the central bank are in favour of withdrawing the recently-imposed upfront tax on interest on government securities in order to maintain the development of the bond market.
According to them, such tax is creating an adverse impact on the country's securities market, particularly secondary one, as the demand for the government-approved securities witnessed a decline in recent times.
"We've already sent a letter to the ministry of finance (MoF) recommending withdrawal of such tax to facilitate the country's securities market," an executive director of the Bangladesh Bank (BB) told the FE Wednesday.
He also said the issue has already been included in the agenda to be discussed in the next cash-and-debt-management committee (CDMC) meeting.
The government has imposed 5.0 per cent upfront tax on interest on its securities, both treasury bills and treasury bonds, for the fiscal year (FY) 2014-15.
"We've urged the government to withdraw the upfront tax immediately for ensuing development of the country's secondary securities market," Anis A Khan, chairman of the Primary Dealers Bangladesh Limited (PDBL), told the FE.
Mr. Khan, also managing director and chief executive officer of the Mutual Trust Bank Limited, said the tax imposition on the interest is creating a damper on the market.
"The recently-created momentum of secondary transactions will be affected adversely if the taxing continues," the senior banker noted.
He also said the PDBL earlier had submitted a letter to the central bank requesting to take up the matter with the MoF for facilitating the country's securities market.
Currently, three treasury bills (T-bills) are being transacted through auctions to adjust government borrowings from the banking system. The T-bills have 91-day, 182-day and 364-day maturity periods.
On the other hand, five government bonds with duration of two, five, ten, 15 and 20 years are being traded on the capital market.
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