The country's two bourses proposed the government to continue the existing tax holiday facility for the demutualised entities and set corporate tax rate on the basis of holding period of share in the next budget for fiscal year 2014-15.
Leaders of Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) made the proposal Wednesday at a pre-budget meeting with the National Board of Revenue (NBR).
NBR chairman Ghulam Hussain chaired the meeting. On behalf of DSE and CSE, Managing Director Prof Dr. Swapan Kumar Bala FCMA and CSE president Syed Sajid Hussain presented the budget proposals.
The leaders sought reduction of tax at source on members' share transaction to 0.015 per cent from existing 0.05 per cent and change of 'member' status as Trading Right Entitlement Certificate (TREC) holder.
DSE and CSE members referred commitment of the Finance Minister on extending tax holiday facility after completion of demutualization.
The stock exchanges sought tax exemption, for a single time, on unrealised capital gain of shares that has been issued to the initial share holders of demutualized exchange.
They have proposed a new scheme for capital market which would allow for income tax credit of 50 per cent, in place of current 15 per cent, to new small investors, who invest up to Tk 100,000 through IPO or secondary securities market and whose annual income is below Tk 1.5 million and with a lock-in period of three years.
Members of the bourses proposed to treat deduction of source tax from dividends to resident and non-resident Bangladeshis at 10 per cent as final settlement, extend the exemption limit of dividend income to Tk 50,000 from Tk 10,000, treating the deduction of source tax from TREC holders as real final settlement of tax.
DSE proposed a reduced tax rate for banks, insurers and financial institutions at 32.5 per cent for listed entities and 37.5 per cent for non-listed entities from existing 42.5 per cent.
It also proposed to set corporate capital gain tax on securities trading at different rates based on holding period. Tax rate at 5.0 per cent could be fixed for holding up shares up to two years followed by 3.0 per cent for two to three years. However, the DSE proposed to exempt tax in case of holding period above three years, which is currently 10 per cent.
The stock exchange members sought exemption of 1.5 per cent stamp duty on transfer of dematerialized shares, which is currently applicable only on listed entities' securities.
In the written submission, DSE also proposed a Special Allocation amounting to Tk 50 billion in the budget for Capital Market Stabilization, enactment of the Financial Reporting Act.
It also sought provisions under which tax audit will not be repeated by any agency other than the NBR.
In the meeting, NBR chairman hinted the possibility of undeclared money in sale of DSE membership.
Responding to the issue, Shakil Rizvi, DSE director and former DSE president, said three stock exchange members have sold out their membership at Tk 940 million.
He said the tax at source on commissions of the stock exchange members should be lowered as their profit level is not so high to pay the tax in the existing rate.
NBR chairman urged the DSE members to suggest ways to collect tax rather than seeking exemptions that reduces strength of competitiveness of businesses.
"Around 1800 applications out of 2000 have been submitted by businesses to the NBR seeking tax exemption in the next budget," he added.
In the meeting, members of Chittagong Stock Exchange (CSE), led by its president Syed Sajid Hossain, proposed to allow investors show acquisition cost on fair value or exempt capital gain tax on sale of 60 per cent block share, withdraw tax on dividend income on companies and increase its tax-free ceiling to Tk 50,000 from existing Tk 10,000.
