Widen listed, non-listed tax gap
Merchant bankers have requested the government to further decrease the corporate tax rate for listed companies such that it attracts non-listed ones into going public.
Although the government recently proposed to reduce the corporate tax rate by 2.5 percentage points in the national budget for fiscal year 2022-23, the gap in tax paid by the two types of firms remains the same at 7.5 percentage points.
The request came at a post budget meeting organized by Capital Market Journalists' Forum (CMJF) and Bangladesh Merchant Bankers Association (BMBA) on the former's premises in the capital yesterday.
Prof Shamsul Alam, state minister for planning, said the government was candid in developing the capital market so that it could contribute more to the economy and to the capital generation process of the private sector.
The government wants to see more companies in the stock market so that general investors can participate in the running of conglomerates, he said.
On the opportunity of whitening black money, Alam said he supported it as the entry of undisclosed money into the economy could bring about a good outcome.
"So, I may talk to the government to continue the money whitening opportunity through the stock market," he added.
To increase the market's depth, companies with good performance records need to be brought in but the present corporate tax gap cannot be considered lucrative, said BMBA President Sayadur Rahman.
He proposed reducing the corporate tax for listed companies to 15 per cent from the recently proposed 20 per cent.
There is no legal binding on a company when it comes to offloading shares, he said, adding that the market capitalization to GDP ratio remains low due to the low number of companies in the market.
Considering the gloom prevailing over businesses in the aftermath of the pandemic, the BMBA proposed that the corporate tax rate be reduced to 27.50 per cent rather than 37.50 per cent.
Listed companies announce dividends after paying corporate tax but a source tax of 10 per cent is charged on that dividend again, discouraging general investors.
Moreover, they prefer making capita gains by selling shares and this tendency make the market volatile, he added.
CMJF President Ziaur Rahman also spoke at the event.