Deduction difficult as access to info scarce

The new provision for realising tax on capital gains of companies and partnership firms is difficult to be implemented to non-availability of actual information on such gains.
The actual information on capital gains of those companies is not easily available as they invest in listed securities by opening more than one BO (beneficiary owner) accounts with different houses.
Officials at the Dhaka Stock Exchange (DSE) have said the capital market may face an adverse impact of the new provision, if the tax authority puts pressure for deducting such tax without devising a feasible way to do it.  
A tax commissionerate has already sent a letter to the premier bourse of the country asking it to act in accordance with the new tax provision.
As per changes in the Finance Act 2014, the National Board of Revenue (NBR) has tasked merchant banks, brokerage firms and financial institutions apart from TREC (trading right entitlement certificate) holders with deducting the tax on capital gains of such companies and partnership firms.
Earlier, as per the section 53O of the Income Tax Ordinance, 1984, only a principal officer of a company holding a TREC from any stock exchange and dealing in listed securities could deduct such tax at the rate of ten per cent.
The DSE officials have said it is difficult to ascertain the net profits at a single point, as the companies and partnership firms have more than one BO account opened with different houses.
Previously tax was deducted from capital gains of companies and partnership firms based on their declarations.
But after the changes in the Finance Act, now the merchant banks, brokerage firms and financial institutions are assigned to collect the information on their own, which is difficult for them.
The NBR officials, however, said they would devise an effective way of realising the tax on capital gains.
"We have already sat with the securities regulator and stock exchanges to fix the problem," a senior NBR official told the FE.
He said they had made much progress in solving the problem.
"Information on investments made in listed securities is available with the Central Depository Bangladesh Limited (CDBL). So, someone will be tasked with compiling the information on investments made by the companies and partnership firms," the NBR official said.
He said software, if required, would be developed for furnishing correct information on such investments.
The DSE officials say a company or partnership firm can open more than one BO account.
"They also can open BO accounts even with the stock exchange and the CDBL," said a senior DSE official.
He said brokerage firms or merchant banks must have the information on actual costing of a company or a partnership firm to ascertain their net profits.
"Due to more than one account opened with different houses, it is not possible for a brokerage firm or others to know about the actual costing of shares purchased through different BO accounts. On the other hand, a company or a partnership firm can transfer their shares from one brokerage firm to another through a link account," said the DSE official.