Star Business Report
The Chittagong Stock Exchange has opposed any rise in tax at source on brokerage commissions.
It said enhancement in the tax rate, as proposed in the new budget, will hinder the capital market growth.
Meanwhile, merchant bankers have urged the government to revise the proposed tax on capital gains of institutional investors, and fix the rate in two tiers.
The government plans raising the tax at source on commissions received by stockbrokers to 0.1 percent from the existing 0.025 percent.
"It's a 300 percent jump and, if implemented, it will seriously affect the market growth as well as hurt the interests of individual investors," said Fakhor Uddin Ali Ahmed, president of the CSE.
"The existing rate is market-friendly. We urge the government not to increase further such tax," he said, suggesting the government facilitate the market so that the trade volume can increase manifold and thus the government can generate more revenue from the stockmarket.
Last year, the tax at source was up by 600 percent, as the volume of trade increased dramatically, he cited example. "Further rise in the volume of trade will help the government collect more revenue from the market," he said.
The CSE chief also said imposition of VAT on stockbroker will resulted in additional burden on investors, as the VAT will increase the cost of doing business and put a negative impact on the trade value and transactions.
"New investors may also feel a cumbersome situation in the investment procedure. Besides, the brokers will not go for expansion," he feared.
Commenting on the proposal of imposing tax on premium value of shares, Ahmed said any levy is related to income or profit, while the premium value of shares is linked to capital raise or paid-up capital of a company.
The premium cannot be income of a company, it is related to capital raise, he said, adding: "The tax on the premium value will also hinder the listing of new companies."
The CSE president also urged the government to revise the proposal of imposing tax on income of institutional investors at 3 percent instead of 10 percent.
He also criticised the government for not taking a clear step with regard to offloading the shares of state-owned enterprises (SoEs) in the market.
Ahmed said a major portion of the budget deficit can be met by offloading government shares, instead of borrowing from the domestic banking system and foreign aid.
The government has decided to offload shares of 26 state-run companies long-time before the budget announcement, but it could not be implemented. "There should be a timeframe for offloading shares," he said.
The finance minister in his budget speech did not elaborate but said floating shares of 26 SoEs is in progress.
The CSE however lauded the government for not proposing any tax on income of individual investors from share trade.
The merchant bankers suggested that the government impose 5 percent tax on an institution if the company makes profits within a year, and the rate should be 3 percent in case of investment for more than a year.
The suggestion came at a post-budget press conference in Dhaka yesterday, organised by Bangladesh Merchant Bankers Association.
The new budget proposed imposition, for the first time, of a 10 percent tax on a company that profits from share trade.
"If the proposed tax is finalised, it will discourage institutional investment in the stockmarket," said Arif Khan, president of the association.
The government needs huge money to continue and implement the development activities, he said.
"We also want to see the practice of paying tax be widened. But the 10 percent tax in one go is too high," he said, urging the government to implement the tax rate in phases.
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