Bourses, NBFIs want tax waiver on bond trading

Stock exchanges and non-bank financial institutions on Tuesday proposed that National Revenue Board waive taxes applicable to bond transaction at bourses as the waiver would help make the bond market vibrant.
They also urged to waive income taxes applicable to banks, NBFIs and insurance companies against their income generated from the investments in bonds.
NBR chairman Md Mosharraf Hossain presided over the pre-budget meeting with representatives from stock exchanges, non-bank financial institutions, merchant banks and insurance companies held at the NBR board room in Dhaka.
‘Dhaka Stock Exchange has refrained from allowing investors trading bonds at the bourse without tax due to lack of clarity in the taxation rules,’ said DSE managing director KAM Majedur Rahman.
‘Besides the economic benefit of bond market in providing long-term financing, it is also a risk-free investment instrument for the stock exchanges,’ Majedur said.
He also urged NBR to give full tax waiver for the bourses for three years as it would enhance DSE’s capacity to invest on product diversification, to set up disaster recovery centre and to upgrade IT infrastructure.
Under the NBR rules, investors are supposed to pay 0.05 per cent transaction charge if bonds are traded through stock exchanges, while there is no transaction fee in trading bonds through banks.
Strong bond market would help the country’s financial sectors to overcome the weaknesses as there is mismatch in fund management as banks are providing long-term finance with short-term deposits, said Chittagong Stock Exchange managing director M Shaifur Rahman Mazumdar.
Withdrawal of the transaction charge from the corporate bond would help improve the bond market at the stock exchanges and that would lessen the pressure on the banking sector, Shaifur said.
Managing directors of both the stock exchanges also suggested that the government should offer tax incentives to the small and medium entrepreneurs in the fiscal budget 2019-2020 to become enlisted with the stock exchanges.
They proposed withdrawal of transaction charge on trading SME companies and waiver of corporate tax for three years for newly listed companies at stock exchanges, saying that inclusion of those companies at the stock exchanges would ultimately increase the government’s direct and indirect tax collection in the medium term.
IDLC Finance group corporate affairs and taxation head Mohammad Jobair Rahman Khan proposed that the revenue board should waive taxes applicable to the bonds issued by the financial institutions as it would help overcome the existing liquidity crisis in the financial sector.
On behalf of Bangladesh Leasing and Finance Companies Association, Jobair also requested to bring down corporate tax on non-bank financial institutions to 25 per cent for listed entities and 35 per cent for non-listed entities, taking into consideration the tax rates in the neighbouring countries.
Rupali Insurance Company chief executive officer PK Roy urged NBR to waive gain taxes on commission given against the reinsurance premium.
Md Mosharraf Hossain assured the stock exchanges’ officials that NBR had no intention to take any policy that would impact on the country’s capital market negatively.
‘Taxation measures will be capital market friendly,’ he said, adding that the persons concerned should check any tax evasion at the capital market.
Replying to the NBR chairman’s query about how much the DSE members’ fund were injected in the capital market under the tax facility provided to the members of the bourse, DSE director Minhaz Mannan Emon said that around Tk 600 crore of 160-170 members of the bourse had already been invested in the capital market.
National Board of Revenue in November last year cut capital gains tax imposed on bourse shareholders to 5 per cent from the 15 per cent on condition that the shareholders would invest their respective shares of the sales proceeds in the capital market within six months and keep the investments under a lock-in for three years.
A Chinese consortium of Shenzhen and Shanghai stock exchanges on September 4 last year bought DSE’s 25 per cent shares worth Tk 947 crore and became its strategic investor.
Source: http://www.newagebd.net

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