DSE suggested that NBR should amend the current corporate tax structure and accordingly recommended (i) increasing tax disparity between listed and non-listed companies to 15% from its current level of 7.5%; (ii) reducing tax on banks and insurance companies to 40% from its current level of 45%; (iii) introducing differential tax schedule for small companies with market capitalisation of 50-100 millions; (iv) providing 10% tax rebates to newly listed companies; (v) reducing tax on treasury bonds from its current level of 20%. Among other things, DSE also argued that new investment in capital markets should be regarded as 'unquestionable' for a minimum of three years.

The rationale behind DSE's recommendations lies in the fact that a flourished capital market is one of the important components to evaluate the overall development and growth of an economy. Besides, capital market can broaden tax bases and generate more revenues for the treasury. Total market value of our capital market is approximately 4% of GDP; whereas it is more than 25% in our neighbouring countries.

Capital gains from share transfers of listed companies, public limited companies, and government securities are currently tax-exempted.

However, capital gains from transfers of stocks and shares of private limited companies are subject to 10% taxes (15% in previous budget).

Individual investors (but not institutional and large investors) receiving dividends up to Tk. 25,000 from listed companies are also tax-exempted.

It is conceivable that a 7.5% tax disparity does not provide sufficient incentives to new businesses to be listed with our bourses.

A comparatively high tax on banks and insurance companies eventually increase lending rates and decrease deposit rates. Higher taxes on fixed income securities induce (small) investors to invest in fixed bank deposits. In the short run investors may be benefited from fixed deposits; however, in the long run stocks and bonds theoretically provide higher returns as opposed to fixed deposits. Unfortunately, our fixed income capital markets have not been developed and expanded because of hostile tax rates on bonds and other debt instruments.

The government should consider implementing and increasing the security transactions taxes. It not only generates treasury revenues but also reduces speculative trading by informed traders (we have not forgotten the 1996 market crash!).

We can foresee a major quandary for our honourable finance minister.

Simultaneously, we are optimistic that the minister will exercise his wildcard options (if any) given that the external fund flows will drastically decline and we are too young to be self-reliant.