Mandatory listing for large firms, sweeping tax reforms proposed to revive capital market: Experts

In a comprehensive move to reinvigorate the country's sluggish capital market, key stakeholders have proposed a series of ambitious reforms ahead of the 2026-27 national budget, including mandatory listing for large corporations and sweeping tax adjustments.

The proposals, placed during a pre-budget discussion at the National Board of Revenue (NBR) headquarters today (1 April), aim to boost investor confidence, attract foreign participation and deepen market liquidity.

Representatives from the Dhaka Stock Exchange (DSE), Chittagong Stock Exchange (CSE), DSE Brokers Association (DBA), Central Depository Bangladesh Limited (CDBL), and the merchant bankers' association presented a unified set of recommendations. The session was chaired by NBR Chairman Abdur Rahman Khan, alongside senior tax officials.

Market intermediaries stressed that the capital market must be treated as a central driver of economic growth rather than a peripheral sector.

Saiful Islam, president of the DSE Brokers Association, said the proposals are aligned with global standards and designed to create a more competitive and inclusive investment environment.

He emphasised that the current economic climate requires the government to treat the capital market as a primary engine for growth rather than a secondary thought.

A major focus of the recommendations is tax reform. The DSE proposed that tax deducted at source on interest income from listed bonds be treated as a final tax liability, simplifying compliance for investors. To further develop the bond market, it suggested a five-year tax exemption on interest income from Treasury bills, Sukuk, asset-backed bonds, and green bonds.

Stakeholders argue that a stronger bond market would reduce the government's reliance on bank borrowing and lower overall financing costs.

To address persistently low foreign participation, currently below 2%, the DSE recommended a five-year exemption on capital gains tax for non-resident investors. Market leaders believe such incentives could attract foreign portfolio investment, strengthen foreign currency reserves, and increase market activity.

The exchange also proposed a five-year tax holiday for companies listed on the SME board, including startups and greenfield ventures, to encourage smaller firms to raise funds from the capital market instead of relying on high-interest bank loans.

For individual investors, the DSE suggested reducing the capital gains tax rate from 15% to 5% on gains exceeding Tk50 lakh, while keeping gains below that threshold tax-free. According to the exchange, high tax rates have discouraged participation from high-net-worth individuals, contributing to declining turnover.

DSE Chairman Mominul Islam said, "We are now in the frontier market; from there, we want to go to the 'emerging market.' The number of investors in the capital market is now 16 lakh; we want to increase it to 50 lakh. We want to increase the daily transaction from Tk500 crore to Tk5,000 crore. As a result, the government's revenue will increase at least 10 times what comes from the capital market."

Stressing the need for cooperation for this transformation, he said they do not want anything that will reduce the government's revenue, but rather want restructuring.

One of the most significant proposals came from the DSE Brokers Association, which introduced a "Deemed-to-Be Listed Company" framework. Under this concept, companies meeting specific thresholds—such as Tk500 crore in paid-up capital, Tk1,000 crore in annual turnover, or Tk500 crore in bank loans—would be required to list on the stock market after a grace period of 15 to 20 years.

The DBA argued that many large corporations benefit from substantial state incentives without offering public ownership opportunities. Mandatory listing, they said, would enhance transparency and broaden investment access.

The association also called for action against inactive or "shell" companies. It proposed that firms failing to hold annual general meetings or declare dividends for three consecutive years should lose tax benefits and be taxed as non-listed entities. This, they believe, would improve accountability and remove underperforming companies from the market.

Additionally, the DBA reiterated its demand to eliminate double taxation on dividend income, noting that the current effective tax rate for individuals exceeds 40%, discouraging long-term investment.

In the credit market, the association proposed allowing listed bonds to be used as collateral for large bank loans, particularly those exceeding Tk500 crore with maturities of more than three years. This measure is expected to promote capital market-based financing.

Meanwhile, CDBL recommended increasing the minimum public shareholding requirement from 10% to 20% for companies seeking tax benefits. A higher public float, it said, would improve price discovery and reduce the risk of manipulation in thinly traded stocks.

The Chittagong Stock Exchange, for its part, emphasised the need for modern market infrastructure. It sought policy support and tax incentives for launching Bangladesh's first commodity exchange and derivatives trading platform. It also requested tax exemptions on specialised software imports required to establish these systems.