The securities regulator BSEC will submit a set of 'specific' proposals to the National Board of Revenue (NBR) tomorrow (Monday) on the measures, including the tax on reserves, in the proposed budget for the fiscal year (FY) 2019-20.
Talking to the FE, Bangladesh Securities and Exchange Commission (BSEC) Chairman Prof M Khairul Hossain said they almost finalised the set of proposals after scrutinising the budgetary measures.
"We have already identified the inconsistencies in the measures included in the proposed budget for FY 2019-20. We'll submit our specific proposals to the revenue board on Monday," Professor Khairul said.
The BSEC chairman already called on Prime Minister Sheikh Hasina to apprise her of the impact of some of the proposed budgetary measures.
His meeting with the Prime Minister came in the wake of criticism from the stakeholders over some of the proposed budgetary measures such as tax on stock dividend and retained earnings.
"I gave hints of the impact of the budgetary measures during the meeting with the Prime Minister. She told me to talk to the revenue board on the proposals," Mr. Khairul said.
He also said the premier assured him of providing any kind of support, including resolving any problem with the budgetary measures, for the sake of the capital market.
"In fact, we want to solve the issues with cooperation from the revenue board and the Ministry of Finance and keep the capital market vibrant," Mr. Khairul said.
The revenue board and the finance minister also told him to submit proposals on how to resolve some problems which could affect the capital market, he disclosed.
When asked about the specific proposals, the BSEC chairman said they would submit three alternative proposals on the proposed 15 per cent tax on reserves and retained earnings.
"As a result, there will be no tax on reserves. The laws which are not available across the world will not be introduced here," Mr Khairul said.
The securities regulator already introduced rules to discourage the practice of paying stock dividends by listed companies.
"That's why the 15 per cent tax, as proposed on stock dividend to encourage cash dividend, is not necessary," Khairul said.
The proposals that would be submitted to the NBR would be similar to the systems put in place across the world, he added.
He also said any capital market issue, if unresolved, could be resolved with cooperation from the revenue board and the finance minister.
Finance Minister AHM Mustafa Kamal in his budget speech on June 13 proposed 15 per cent tax on stock dividends to encourage payment of cash dividends by listed companies. This tax will be applicable to the listed companies only.
Mr Kamal also proposed 15 per cent additional tax on retained earnings and reserves, if it exceeds 50 per cent of a company's paid-up capital.
As claimed by the government, some companies retain or reserve the net profits instead of distributing dividends to investors.
"For this reason, investors are deprived of dividend on their investment and this, in turn, is adversely affecting our share market," the minister stated in his budget speech.
According to the Dhaka Stock Exchange (DSE), the country's premier bourse, a total of 209 listed companies will have to pay an additional amount of Tk 107.92 billion (10,792 crore), if the proposed 15 per cent tax on 'reserves and retained earnings' is implemented.
Bangladesh Association of Publicly Listed Companies (BAPLC) and other stakeholders already opposed the 15 per cent tax on reserves, as they retain profits paying tax once.
They have also opposed the 15 per cent tax on stock dividend as this measure they say will hinder the growth of the companies.
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