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Daily Business News All Daily Business News
20 May 2013
DSE seeks tax break for five years

The Dhaka Stock Exchange (DSE) has sought a tax break for the first five years after demutualisation, a process of separating the bourses’ management from ownership to ensure transparency in the market.
“A law on demutualisation has already been passed in parliament. But the DSE is incurring operating losses due to the current market situation,” said Ahmad Rashid Lali, senior vice-president of the bourse.
The DSE is exempted from income tax through a government notice of 1996, he said. “We expect that the exemption incentive will be continued for at least five years to run the exchange’s activities successfully.”
He made the argument while placing a number of demands before the National Board of Revenue in Dhaka yesterday.
The demutualisation of a stock exchange transforms it from an entity owned by mostly brokerage-owning members into a for-profit company owned by shareholders. It ensures a sound corporate governance, alternative business model and operational efficiency.
Bangladesh’s stock exchanges are now non-profit cooperative organisations, owned by the exchange members who are usually stockbrokers.
The DSE has also asked for one-time tax exemption on capital gains that will be arise from the issuance of shares to existing stock exchange members after demutualisation.
“Any capital gain on the newly issued shares will be only in papers and there will be no cash inflow for such transaction. So, the tax exemption is required for smooth switching from a mutualised stock exchange to a demutualised one,” the DSE explained.
The prime bourse requested the government to allocate Tk 5,000 crore for the stockmarket in the upcoming budget to stabilise the market which is going through high volatility since the crash in early 2011.
Among other proposals, the DSE recommended slashing of corporate tax for listed banks, insurance and non-bank financial institutions to 37.5 percent from the existing 42.5 percent.
It also called for reduction of tax at source for brokerage houses to 0.015 percent from 0.05 percent.
The bourse recommended launching a new scheme which would allow a 50 percent rebate on income tax for investors with outlays of up to Tk 1 lakh in the market. The scheme, however, would have to have a lock-in period of three years.
The DSE also demanded cuts in taxes on capital gains for companies which currently pay 10 percent to the NBR on incomes derived from share transactions.
“There is no possibility of revenue fall for the government because of a reduction in corporate tax rate for banks, insurances and non-banks, as such companies are showing higher profits every year,” the DSE argued.
“On the other hand, the companies would be able to extend higher dividends, and eventually, general investors would benefit.”

Source :: The Daily Star