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Capital gain tax irks bourses

Star Business Report
The stock exchanges see the proposal to impose 3 percent tax on capital gains from share sales in fiscal 2014-15 as an unfeasible plan due to the lack of necessary infrastructure.
The tax, which comes as part of the government's efforts to meet its ambitious revenue target, will be applicable to any investor whose capital gains exceed Tk 10 lakh and will be deducted at source.
The premier bourse said many individual investors have multiple beneficiary owner accounts with a number of brokerage houses, so it would be tricky to calculate the net capital gains or loss.
"But the most complex part will be in case of linked BO accounts," Swapan Kumar Bala, managing director of the Dhaka Stock Exchange, said while addressing a post-budget press conference at the bourse premises yesterday.
If an investor sells shares through a linked BO account, the selling brokerage house cannot calculate the profit or loss as it will
not have the information on the buying cost of the shares, he said.
Besides, the existing trading system does not allow the calculation on adjustment between capital gains or losses, necessary as per income tax rules, according to Bala.
"In case of multiple BO accounts, I wonder how the calculation will be done and who will do this. Given all these perspectives, we think the tax provision cannot be implemented right now."
The DSE however lauded the government for exempting the bourses from paying taxes for the next five years and raising the tax-free dividend income ceiling from Tk 10,000 to Tk 15,000.
"The government's promises on enacting the financial reporting act and setting up clearing corporation are also a welcome move for the capital market - these will ensure corporate governance among the listed firms, increase investor confidence and attract foreign investment," Bala said.
About the reduction of corporate tax from 37.5 percent to 35 percent for non-listed firms, he
said: "It does not mean the companies will be discouraged from listing, as the corporate tax for listed firms is lower."
The corporate tax for listed firms is 27.5 percent.
But Muhammad Abdul Mazid, chairman of Chittagong Stock Exchange, said tax reduction for non-listed firms will create discrimination, adding that the tax for listed firms should be reduced to 25 percent from 27.5 percent.
"The budget is not fully stockmarket friendly," he said, while urging the government to withdraw tax on capital gains for individual investors as brokerage firms will face problems in retaining the tax.
Shareholders who provide the e-TINs will see a 10 percent tax deduction on their dividend earnings in the upcoming fiscal year, but a good number of investors do not have it, he said. "Otherwise, the National Board of Revenue will impose 15 percent tax."
Mazid also said the 15 percent tax on capital gains from share transfer for brokerage house should be brought down to 5 percent.