| Update:
Jan. 02, 2022, 4:29 p.m.

The securities regulator recommended making tax exemption facilities available to all investors in all types of bonds in order to encourage the mobilization of capital market funds for the benefit of the country’s industrialization.

The Bangladesh Securities Commission (BSEC) made this suggestion in a recent letter to the Chairman of the National Board of Revenue (NBR).

Currently, individual investors other than banks, insurers and financial institutions are entitled to a tax exemption on income from investments in zero coupon bonds.

However, none are exempt from tax on income made on investments in other types of bonds.

Thus, a large number of investors are not encouraged to invest in bonds while issuers are also less interested in raising funds through such instruments.

With this in mind, the BSEC suggested providing tax exemption to all investors, including banks, insurers and financial institutions, on their income generated from investments in all types of bonds.

BSEC spokesman Mohammad Rezaul Karim said one of the main hurdles for bonds is falling interest from issuers amid a low rate of return on these debt instruments.

“Issuers will be encouraged to issue bonds on a large scale if there is a high rate of return on the bonds. Then companies will be interested in raising funds by issuing bonds without taking out bank loans.”

Mr Karim says the recommendation for tax exemption is also in the interest of the bond market and investors.

The BSEC letter points out that certain changes are needed in the obligations sections of the Income Tax Ordinance 1984.

“If the recommendations are taken into account, it would encourage the mobilization of long-term funds in the capital market for industrialization purposes, thereby increasing the overall economic development of the country by generating more employment opportunities.”

According to the letter, the government’s overall revenues would also be improved.

BSEC also recommends revising the definition of listed companies, registered in Bangladesh under the Companies Act 1994, by replacing the word “share” with “securities”.

Targeting the development of the bond market, the regulator approved different types of bonds after taking over the historic commission in May 2020.

In 2021, BSEC enabled 23 companies to raise Tk 125.73 billion through bonds with different characteristics and sukuk, a bond-like instrument.

The characteristics of the BSEC approved bond include zero coupon, perpetual and coupon, fully redeemable, convertible bonds.

The regulator has also approved a green bond. He is also interested in authorizing the municipal bond and a proposal is also being processed. The tax administration has already offered tax incentives for investments in sukuk.

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