The Dhaka and Chittagong stock exchanges yesterday requested the National Board of Revenue to increase the ceiling for tax-free dividend income to Tk 50,000 from Tk 20,000 at present.

The twin bourses made the plea considering the present scenario of the stockmarket that has been passing through a prolonged downward trend.

They submitted a set of proposals to the tax authority for consideration in the upcoming budget for the next fiscal year.

Small investors should get tax exemption for up to Tk 50,000 on dividend income, as it will encourage them to further invest in the capital market, the Dhaka Stock Exchange said.

If the proposal is taken into consideration, it will help ease the liquidity crisis in the market, the premier bourse said. "Small investors will also be benefitted as they have suffered a lot due to the market turmoil previously," the DSE said.

The Chittagong Stock Exchange said investors are incurring losses due to a prolonged downward trend in the market and the incomes of many of them are below the taxable limit. 

"So, the limit of tax-free dividend income should be increased to give the investors a breather."

The stock exchanges have proposed the NBR to reduce tax at source on share transactions to 0.015 percent from the existing 0.05 percent, which will ultimately enhance trade volumes and related tax.

The bourses, on behalf of the government, collect the tax at a rate of 0.05 percent on the value of shares, mutual fund units or other securities transacted at the stock exchanges, and deposit the revenue with the state coffer.

The bourses proposed providing a full tax exemption facility for five years, instead of the existing partial exemption at graduated rates, for sustainable growth and smooth operation of the exchanges, which are 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 Dhaka bourse said in its proposal.

The CSE said the tax exemption will help them reinvest the money for technical and infrastructural development of the exchanges that are necessary to attract strategic investors for the demutualised bourses.

The bourses also 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. Meanwhile, Bangladesh Insurance Association and Bangladesh Merchant Banks Association urged the NBR to reduce corporate taxes to 15 percent.

Insurance companies pay 42.5 percent in corporate tax, while merchant banks pay 37.5 percent.