NBR chief criticises intermediaries, threatens to scrap capital gains tax benefits

The chairman of the National Board of Revenue (NBR) strongly criticised a proposal from the country's stock market intermediaries to reduce capital gains tax, calling it "a very indecent demand".

During a pre-budget discussion held today (17 March)at the NBR headquarters in the capital, Abdur Rahman Khan also questioned the rationale behind the Tk50 lakh tax exemption ceiling currently offered to investors, suggesting it should be removed.

Representatives from the Dhaka Stock Exchange (DSE), DSE Brokers Association, Association of Bankers Bangladesh, Insurance Association, and Merchant Bankers' Association presented their proposals for inclusion in the national budget for FY26.

The DSE, Chittagong Stock Exchange, brokers' association, and merchant bankers proposed several measures, including reducing the capital gains tax rate, introducing a uniform tax on dividends, lowering turnover tax, offering tax holidays for newly listed companies, and widening the tax gap between listed and non-listed firms.

Public trust in the stock market had eroded, and tax benefits alone could not restore it

Abdur Rahman Khan, chairman, National Board of Revenue

DSE Chairman Mominul Islam argued that if these proposals were implemented, the capital market would grow, ultimately boosting the government's revenue.

In response to the demand for reducing capital gains tax, the NBR chairman questioned, "Where investors are not making profits, how can you justify this demand?"

"This demand seems to benefit only the oligarchs, who could make crores of taka in profit without paying a single taka in tax."

Khan said the capital gains tax rate was set at 15% for profits exceeding Tk50 lakh in response to a demand made by the market intermediaries, yet stakeholders continue to push for further reductions instead of praising the existing reductions. 

"This undermines the credibility of your other demands," he expressed frustrations.

"In the current downward trend in the market, I want to see who is making more than Tk50 lakh in profit. They earn Tk100 but refuse to pay Tk15 in tax," he said. 

"What kind of mentality is this? This aversion to paying taxes is a disease that needs to be cured."

The NBR chairman said it reflects a lack of understanding of the state's needs and a failure of governance. Raising such demands at the outset of the discussion only damages your credibility.

In response to the tax incentive proposals, he said public trust in the stock market had eroded, and tax benefits alone could not restore it.

Khan pointed out that companies are listed on the stock market after being vetted by multiple regulators. The public assumes that knowledgeable regulators have thoroughly assessed and approved these companies. However, many listed companies turn out to be weak or loss-making entities.

"How will you develop this market?" he asked. "No matter how many tax benefits you offer, how will you regain the trust of those who were cheated?"

He said the focus should be on listing companies with strong track records, promising futures, and the potential for profitability. "Investors need assurance that they are investing in good companies. Without this assurance, tax benefits will be meaningless," he added. 

DSE Chairman Mominul raised the issue of high Beneficiary Owner (BO) account fees, which are significantly higher than bank account fees. Currently, the annual BO account fee is Tk450, with Tk100 going to brokerage firms, Tk100 to the Central Depository Bangladesh Limited (CDBL), Tk50 to the Bangladesh Securities and Exchange Commission (BSEC), and Tk200 to the government.

When NBR chief questioned which government entity receives Tk200, Mominul clarified that the amount is deposited in the government treasury under a BSEC ordinance. Khan dismissed the issue, saying, "This is not NBR's concern. BSEC should address it. Let's not waste time on this."

The DSE chairman emphasised the need for a government push to revive the sluggish market, predicting that turnover could rise from the current Tk400 crore to Tk2,000-2,500 crore, thereby boosting government revenue. 

Khan countered, "The government has used such pushes multiple times, but the market has only worsened. The core issue is a lack of confidence. If the market receives a strong message that losses will be minimised and economic uncertainty addressed, confidence will return, and people will invest."

Meanwhile, the NBR chairman strongly criticised the role of the Investment Corporation of Bangladesh in the stock market, saying the ICB recently took Tk3,000 crore from the government but failed to benefit the market.

"When ICB took the funds, I advised the managing director to prioritise the company's own interests rather than the market's interests," he said.

Explaining what he meant by "own interests," the chairman said, "When share prices are low, they should buy, and when prices rise, they should sell. This strategy would have maximised their profits. However, they failed to do so, resulting in losses amounting to thousands of crores of taka."

Turning to the insurance sector, the NBR chairman expressed concerns over its lack of reputation and governance.

"The insurance sector suffers from a severe lack of good governance," he said. "The premiums paid by the public are akin to bank deposits, but insurance company owners often treat this money as their own. This mindset needs to change."

During the discussion, the Association of Bankers Bangladesh presented several proposals, including the implementation of VAT software, the withdrawal of excise duty on loan and credit card accounts, and setting a fixed timeframe for completing VAT audit activities.

Other proposals included extending the exemption period for deducting income tax at source on interest payments for loans taken by non-residents from Bangladesh and reducing the corporate income tax rate for banks.