DSE calls for reducing tax at source on share transactions

The Dhaka Stock Exchange has proposed the finance ministry to reduce tax at source on share transactions to 0.015 percent from the existing 0.05 percent considering the current volatile situation in the market.

The reduction will ultimately enhance trade volume and related tax, the premier bourse said in a set of proposals that were submitted to the finance ministry for consideration in the next fiscal year's budget.

The DSE, on behalf of the government, collects the tax at 0.05 percent rate on the value of shares, mutual fund units or other securities transacted at a stock exchange, and deposits the revenue to the state coffer.

The prime bourse also proposed providing full tax exemption facility for five years, instead of existing partial exemption at graduated rates, for sustainable growth and smooth operation of the exchange, which is now incurring operating losses.

“Currently, the government is not getting any tax on the exchange's income due to the exemption and hence, the 100 percent tax holiday will not affect the government's revenue,” the bourse said.

The Dhaka bourse proposed to increase the ceiling of tax-free dividend income to Tk 50,000 from the existing Tk 20,000.

Considering the present market scenario, small investors should be allowed for tax exemption up to Tk 50,000 on dividend income, as it will encourage small investors to invest in the capital market, it said.

If the proposal is taken into consideration, it will help ease the liquidity crisis in the market, the DSE said.

“Small investors will also be benefitted as they have suffered a lot due to the market turmoil previously,” the bourse said.

The DSE demanded a reduction in the corporate tax rate for listed companies to 25 percent from 27.5 percent. The corporate tax rate for non-listed companies is 35 percent now.

The bourse also called upon the finance ministry to withdraw the provision of deduction of tax from gains on securities traded in the exchanges, as it is not possible by TREC (trading right entitlement certificate) holders to calculate the gain after adjusting previous five years' capital loss.

“Most TREC holders' companies don't have the capacity to do this task,” the DSE said.

As per the law, TREC holders will deduct 10 percent tax on realised gains from share trading by an institution.