Although the corporate tax levied on listed firms is lower than that of their non-listed counterparts, many companies in Bangladesh lack interest in joining the stock market as they want to avoid the obligation of ensuring good corporate governance, regularly disclosing financial information and complying with other rules.

Besides, their tendency to evade taxes keeps many firms away from the stock market as their financial records would come under scrutiny once listed, according to market analysts and participants.

Without tightening tax rules and ensuring proper enforcement, only reducing corporate tax and maintaining the gap between publicly listed and non-listed companies is unlikely to bring about a big improvement in the supply of new securities to the market, which is in a bearish trend.

The current corporate tax rate for listed and non-listed companies is 22.5 per cent and 30 per cent respectively.

The National Board of Revenue has been keeping a 7.5 percentage points gap between the two categories since fiscal year 2020-21 while it had been 10 per cent since fiscal 2006-07.

AB Mirza Azizul Islam, former adviser to the caretaker government, said the entrepreneurs are not attracted with the incentive of a tax gap for many reasons.

When a company is listed, then it is held accountable and needs to place financial statements regularly.

"Moreover, some entrepreneurs do not want to share their companies and instead prefer full control and so, they avoid offloading shares," he said.

In addition, listed companies are also bound to hold annual general meetings but some entrepreneurs dislike such obligations, Islam added.

In response to a query, Islam, also a former chairman of the Bangladesh Securities and Exchange Commission, said tax evasion is easy for non-listed companies with the help of auditors.

"That is why some companies don't want to get listed even though a tax gap remains between listed and non-listed firms," he said.

The corporate tax gap for listed and non-listed companies is not considered lucrative to most entrepreneurs as the culture of tax evasion is common for non-listed companies.

"So, listings have not boomed despite several changes to the tax gap year after year," said a merchant banker preferring anonymity.

The number of companies listed with the Dhaka Stock Exchange (DSE) currently stands at 349 whereas around 30,000 firms submitted tax returns to the National Board of Revenue in the last fiscal year.

The number of listed firms in India's Bombay Stock Exchange was 5,439 while Pakistan's Karachi Stock Exchange was 576.

The tax gap was 5-percentage points till fiscal 2002-03 but it then rose to 7.5 percentage points in the next fiscal year to attract companies to get listed.

In fiscal 2006-07, the government raised the gap further to 10 percentage points, which continued until being eventually reduced to 7.5 percentage points in 2020-21, according to the National Board of Revenue.

"The overall ecosystem is not lucrative for a company to go public either so the number of listed companies in the market is still low compared to neighbouring countries," he said, adding that easier access to bank loans and their unwillingness to disclose financial information makes them shy about entering the stock market.

If a company is being listed with the stock exchanges, then it has hardly any scope to evade tax.

"They consider tax evasion is more lucrative than the tax gap as tax evasion is easy," the merchant banker said.

Richard D Rozario, president of the DSE Brokers Association of Bangladesh, said there are many reasons that discourage entrepreneurs from going public, such as easy access to bank loans and lack of accountability for non-listed companies.

There is no obligation for multinational companies to get listed with the stock market in Bangladesh but they should be otherwise ordered to do so.

"Unless ordered, the multinational companies will not get listed but the stock market badly needs them," he added.

The number of initial public offerings (IPOs) and fund raising from the stock market dropped in fiscal 2021-22. In the last 11 months, six companies raised funds of around Tk 608 crore through IPOs whereas 16 firms had raised funds of Tk 1,684 crore a year earlier.