Merchant bankers have made a number of proposals to the government including allowing legalising undisclosed/untaxed money through investment in the capital market in the upcoming budget, officials said.
Bangladesh Merchant Bankers Association (BMBA) has recently submitted the proposals to the National Board of Revenue.
Other proposals of BMBA are keeping same tax rate for all capital intermediaries (brokerage houses, merchant banks and asset management companies), providing discount on value added tax (VAT) rate for listed companies and reducing capital gains tax to 5 per cent from 10 per cent if shares are held for more than a year.
"There is a large amount of untaxed money in our economy. As it is undisclosed, owners are not being able to invest it in any productive sectors; rather this money is being used in unproductive or illegal activities. If the government allows this money to be invested in the capital market without question from any regulator, this money will come to the mainstream and will be utilised in the productive sectors," a BMBA source said.
Currently, the listed companies get only 10 per cent tax benefit for listing. This incentive should be increased to encourage more and more new companies to the capital market listing, he said.
Presently, the asset management companies are availing 15 per cent tax rate and the BMBA has proposed that all intermediaries should be allowed same rate to create a level playing field, he mentioned.
The VAT rate is same for both listed and non-listed companies. But the listed companies should be allowed a discount of 40 per cent on existing rates for being listed because the listed companies' accounts are more transparent and they pay more tax and VAT, according to the proposals.
"If the government considers our proposals positively, we hope that cash flow and investable fund will increase in the country's capital market," secretary general of BMBA Khairul Bashar Abu Taher Mohammed told the FE.
"Capital market has been showing a continuous downtrend since 2010. The institutional investment has been constrained in the capital market since 2010 due to some regulatory limitations imposed within a short period of time," an expert said.
Currently, there are 53 merchant banks in the country, according to the association data.
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