The Bangladesh Merchant Bankers Association (BMBA) has proposed a set of fiscal and policy reforms for the FY2026-27 national budget to address structural weaknesses in the capital market and boost listings, liquidity and investor participation.
The recommendations, submitted to the National Board of Revenue (NBR), come as Bangladesh’s capital market remains underdeveloped, with market capitalisation at 15 to 18 per cent of gross domestic product compared to 40 to 80 per cent in peer emerging markets.
To attract large companies, BMBA proposed lowering the corporate tax rate for listed firms to 18 per cent, while newly listed companies would enjoy a reduced rate of 15 per cent for the first five years.
Currently, listed companies pay 22.5 per cent tax on business income or 20 per cent if all income is received through banking channels. While their non-listed counterparts’ income is subject to higher tax.
The association said the current tax structure still offers limited incentives for listing, discouraging large corporations from entering the market.
To strengthen incentives, companies that list before 2030 would receive a 50 per cent tax waiver for the first three years and 25 per cent for the next two years, subject to maintaining 20 to 25 per cent public shareholding and regulatory compliance.
BMBA said many large domestic and multinational firms meet listing criteria but remain outside the market, limiting the supply of quality securities.
To address this, it proposed a “deemed-to-be listed” framework for companies with paid-up capital above Tk500 crore, turnover over Tk1,000 crore or bank borrowing exceeding Tk500 crore.
Such firms would be encouraged to list in exchange for tax benefits and better access to capital market financing, while those remaining unlisted could face a 3 to 5 per cent corporate tax surcharge or reduced incentives.
The association also called for bringing multinational and large corporate groups into the market by encouraging firms with annual revenue above Tk1,000 crore or long-term operations in Bangladesh to list at least 20 per cent of their local subsidiary shares.
Incentives include reduced withholding tax on dividends and corporate tax benefits for listed subsidiaries to increase supply of quality securities.
BMBA said the financial system remains heavily bank-centric, with corporate financing largely dependent on loans, increasing leverage and limiting long-term funding.
To support intermediaries, it proposed amending Section 51 of the Income Tax Act 2023 to allow stock brokers, dealers and merchant bankers to treat bad debts from margin loans as deductible expenses.
The sector carries around Tk9,700 crore in negative equity from margin loans but does not receive similar tax treatment as banks.
The association also proposed withdrawing preferential tax rates for listed companies that fail to hold annual general meetings or declare dividends for three consecutive years.
To boost investor participation, BMBA recommended full exemption of capital gains tax for individuals by removing the Tk50 lakh ceiling.
It also proposed lowering corporate capital gains tax from 15 per cent to 10 per cent.
Dividend income up to Tk5 lakh should be tax-exempt, with tax deducted at source treated as final beyond that level.
The association further called for removing the 10 per cent tax on retained earnings when more than 70 per cent of net profit is transferred to reserves.
It also proposed scrapping the 10 per cent tax on stock dividends when they exceed cash dividends.
BMBA said the reforms would improve market depth, encourage quality listings and attract long-term investment, reducing pressure on the banking sector and supporting sustainable growth.
