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Bourses seek tax waiver for 5 years

Star Business Report
THE twin bourses yesterday placed a set of recommendations to the government, including tax exemption for them for at least five years, to facilitate a smooth transition of the demutualised exchanges.
It would take around seven years to complete the bourses' business plans as per the demutualisation scheme, which was approved by the stockmarket regulator in September last year.
Before demutualisation, the stock exchanges were nonprofit cooperative organisations owned by the exchange members, and no corporate tax was applicable to them.
But now, the bourses have become profit oriented companies owned by shareholders, and will have to pay corporate taxes.
The corporate tax waiver for another five years would help the stock exchanges complete the demutualisation processes successfully, bourse officials said, while placing their demands with the National Board of Revenue at the tax collector's office in Dhaka.
The stock exchanges proposed to increase the ceiling of tax-free dividend income from the existing Tk 10,000 to Tk 50,000.
As all the listed companies pay taxes on their profits, taxing the dividends creates double taxation. The bourses recommended withdrawal of tax on dividends to avoid such double taxation.
The Dhaka and Chittagong stock exchanges also called for reducing tax at source forTREC (trading right entitlement certificate) holders to 0.015 percent from the existing 0.05 percent.
The bourses recommended launching a new scheme that would allow 50 percent rebate instead of the existing 15 percent on income tax for investors with outlays of up to Tk 1 lakh in the market. The scheme would have to have a lock-in period of three years.
They demanded a reduction in the corporate tax rate for banks, insurance companies and financial institutions to 32.5 percent for listed entities and to 37.5 percent for non-Iisted entities from 42.5 percent at present.
The stock exchanges urged the government to keep capital gains from long-term investments tax free in the next fiscal year in a bid to encourage institutional investors to park funds in the markets.
The bourses also proposed a tax waiver on capital gains made by any institution whose investment in stocks exceeds three years.
The provision will attract an inflow of investments in the secondary market, which has been facing a severe liquidity crisis for a long time amid high volatility, the bourses said in the budget proposals.
The proposal also offered a 7.5 percent capital gain tax for holding shares for 1-2 years and 5 percent for 2-3 years.
Presently, the companies and firms that are considered major institutional investors pay 10 percent tax on capital gains.
The bourse also recommended revising the corporate tax in three slabs for small and medium firms - zero percent for companies that will make profit up to Tk 1 lakh, 17.5 percent for up to Tk 5 lakh and 37.5 percent for above Tk 5 lakh.
They also urged the government to allocate Tk 5,000 crore for the stockmarket in the upcoming budget to stabilise the market, which is suffering from high volatility since the price debacle in early 2011.