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The government has proposed a significant change in the source tax collected on interest and discount on bonds in an effort to strengthen the bond market, reports bdnews24.com.
Finance Minister AHM Mustafa Kamal recommended the initiative in the budget set out for FY 2020-21 on Thursday.
In his speech to his colleagues in parliament, the minister said: “We have taken steps to develop a strong bond market in the country to provide long-term financing.”
The problems of mismatched balance sheets at financial institutions because of the short-term liability set against long-term assets would be mitigated through this, he said.
Kamal proposed the abolition of the provision that requires source tax to be collected upfront on interest and discount on bonds. Instead, the minister proposed to introduce the provision of TDS at the time of payment of interest and discount on bonds.
“In addition, instead of the present provision of deducting withholding tax on the value of bond transactions, I propose the introduction of withholding tax deduction on the commission fixed by the Securities and Exchange Commission,” he said.
Asked about the matter, Dhaka Stock Exchange Director Shakil Rizvi said: “This decision will help to build a stronger stock market. Until now the need to pay a significant tax on the value of the transaction was one of the largest barriers in the bond market. Now the market will be better.”
Minister Kamal said he hoped the measures would open up new opportunities for financing larger projects.
“The flourishing of the bond market will open up new scope and opportunities for financing mega-projects in public and private sectors. It is expected that this will reduce the cost of financing in public and private sectors.”