Staff Correspondent: The DSE Brokers Association of Bangladesh (DBA), the organization of brokerage firms of the Dhaka Stock Exchange, has demanded to decrease the tax at source in trading stocks to Tk0.02% from Tk0.05%.
Its leaders said that there has been no improvement in the Bangladesh Securities and Exchange Commission (BSEC) after August 5, except for fines. In reality, no work is being done in the stock market regulator.
At a press conference held in the capital on Saturday, leaders demanded the points.
At present, the National Board of Revenue (NBR) collects a 0.05% tax at the source on the total value of securities transactions conducted by brokerage firms, which amounts to nearly 25% of their gross income. Back in 2005, under the Finance Act, this rate was only 0.015%.
According to the DBA, the current tax rate is significantly higher compared to neighboring and regional markets. For instance, the turnover tax is 0.01% in India, 0.00065% in Pakistan, 0.0075% in Singapore, and 0.00565% in Hong Kong.
As daily trading volumes have declined drastically in recent years, brokerage firms' incomes have also plummeted. Still, these firms continue to pay taxes, despite earning no profit, they added.
In light of this, DBA leaders urged the government to align Bangladesh's tax rate with regional standards and reduce the source tax on securities transactions from the current 0.05% to 0.02%.
Saiful Islam, president of the DBA, said that if operating income alone is considered, all brokerage firms have been incurring losses for years.
"We are suffering losses mainly due to the ongoing downturn in the market," he said.
He further added, "Over the past 15 years, a series of misguided policies have severely damaged the capital market. Investor confidence has been completely eroded. As a result, the number of BO (beneficiary owner) accounts has dropped to 1.2 million, whereas it was 3.3 million back in 2010."
Dhaka Stock Exchange (DSE) shareholder directors Minhaz Mannan Emon and Shakil Rizvi were present at the event.
He also said, "A grand Bangladesh Investment Summit has been organized in the country, but the capital market did not receive any representation or space in the event. This is deeply unfortunate. I don't understand how an investment summit can be considered successful without involving the capital market."
DBA leaders said that the work is BSEC's, but BSEC is handing over their work to the ministry. Through this, the stock market is being set back by 50 years.
Regarding the BSEC task force, DBA leaders said that the people with whom it has been formed are actually inexperienced in the real sense. They have again done focus groups.
Md Saifuddin, senior vice president of the DBA, said, "Nowhere else in the world is there such an unbalanced tax structure. The government has a right to collect taxes on profit-but when a business is running losses, it should not be forced to pay income tax. Yet, for years, brokers have paid taxes despite continuous losses. This is sheer oppression. This is the kind of injustice that pushes people to take to the streets."
Minhaz Mannan Emon added, "In the past 15 years, we haven't seen any visible efforts to restore investor confidence. Instead, new rules and taxes have been imposed that effectively pushed investors out of the market."
"In the last 10 years, no high-quality company has entered the market through an IPO that we could proudly present to local or foreign investors and encourage them to invest. On the contrary, 70-80% of the IPOs that have come in the last 15 years have turned into junk stocks," he said.