Reducing corporate tax for non-listed cos won't benefit the stock market

Stakeholders have expressed mixed opinion on the budgetary proposal of reducing corporate tax for non-listed companies amid the unchanged rate of the same for listed companies.

Most of them said the proposed reduction of corporate tax for non-listed companies will leave no positive impact on the capital market.

In the budget proposal for the fiscal year (FY) 2020-21, the government has proposed to reduce the corporate tax gap by 2.5 per cent to 32.50 per cent for non-listed companies.

"Most of the non-listed companies are non-compliant and are accused of window dressing the balance sheets to evade the corporate tax. So, the reduction of their corporate tax will bring no significant output for both the government and public," said Azam J. Chowdhury, the president of Bangladesh Association of Publicly Listed Companies (BAPLC).

He said the listed companies are compliant with the rules and regulations due to the strong regulatory vigilance.

"The shareholders and the government can get more benefit if the corporate tax is reduced for the listed companies," said the BAPLC president.

He said the authority concerned should check it to be sure whether the reduction of corporate tax has been proposed for non-listed or listed companies.

The listed companies pay corporate tax at the rate of 25 per cent. So, the existing gap between the corporate tax of listed and non-listed companies is 10 per cent.

As per the proposal of reducing corporate tax of non-listed by 2.50 per cent, the tax gap will come down to 7.50 per cent.

The stakeholders earlier had made the demand of increasing the gap of corporate tax paid by listed and non-listed companies so that the latter are inspired to go public.

Echoing the BAPLC president, a merchant banker said the listing of non-listed companies does not depend on the reduction or increasing corporate tax.

"I do not know how much benefit will be ensured through the reduction of corporate tax for non-listed companies keeping this tax unchanged for listed companies," the merchant banker said.

In his budget speech, the finance minister said the proposal of reducing corporate tax for non-listed companies has been made to ease their burden created by the COVID-19.

"To ease the tax burden of valued taxpayers at this critical time of the COVID-19 pandemic, I propose a 2.5 percent reduction in the tax rate of non-publicly traded companies to fix it at 32.5 per cent from that of 35 per cent," finance minister said in his budget speech.

Md. Shakil Rizvi, a DSE director, has welcomed the proposal of reducing the corporate tax for non-listed companies saying that the measure will facilitate the growth of such companies.

"The corporate tax of listed companies should also be reduced so that non-listed companies are inspired to go public to avail the tax benefit," said Mr. Rizvi.

He said they will place the demand of reducing corporate tax for listed companies.

"The tax gap between the listed and non-listed companies should be at least 10 per cent," Mr. Rizvi said.

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