The Bangladesh Association of Publicly Listed Companies (BAPLC) has proposed a series of targeted tax reforms for the 2026-27 fiscal year, focusing on easing the burden on listed firms and creating stronger incentives for investment and market participation.
At the centre of the proposal is the concern that the current tax structure discourages companies from entering the capital market and limits investment growth.
Listed companies now pay 22.5 per cent tax, reduced to 20 per cent if transactions are conducted through banking channels, but only when at least 10 per cent of shares are issued through IPOs.
BAPLC proposed extending this benefit to firms raising capital through right issues and repeat public offerings, arguing that the existing rule excludes companies using alternative but legitimate fundraising methods.
It also highlighted the narrow tax gap between listed and private companies, currently around 20 per cent versus 27.5 per cent, as a major disincentive.
The proposal seeks to widen the gap to at least 10 percentage points by lowering the listed company tax rate to 17.5 per cent, aiming to encourage more large and compliant firms to get listed and operate transparently.
Pressure from advance taxation has also been flagged as a key issue. Currently, companies face a 5 per cent tax deducted at source (TDS) on payments, often leading to excess advance tax.
BAPLC proposed reducing the TDS rate to 1 to 3 per cent for small-cap listed firms with capital below Tk30 crore, saying the current system creates liquidity stress and, in some cases, turns profits into losses.
The minimum tax regime was also identified as burdensome and complex. The proposal recommends simplifying the system so that the payable tax is the highest among actual tax, tax on income or 0.60 per cent of turnover, while reducing the turnover-based minimum tax rate from 1 per cent to 0.50 per cent to ease pressure on low-margin businesses.
In capital markets, BAPLC said tax complexities continue to limit depth and participation. Investors in bonds currently face a 10 per cent tax deducted at source along with additional tax liability.
The proposal seeks to treat this source tax as final for listed treasury bonds, corporate bonds, sukuk, green bonds and similar instruments, aiming to reduce uncertainty and strengthen the bond market as an alternative source of long-term financing.
Foreign investors, who currently pay 15 per cent capital gains tax on listed securities, account for only around 1.57 per cent of market transactions.
BAPLC proposed a full exemption on such gains, saying it would attract foreign capital, improve liquidity and increase foreign currency inflows.
On compliance, the association said the tax system does not reflect modern business practices. It proposed recognising digital documentation, including ERP data, e-invoices and bank records, as legally valid to simplify audits and improve transparency.
It also called for aligning definitions of exports and income between income tax and VAT laws to reduce confusion for businesses.
In dividend taxation, the proposal noted that loans or advances to shareholders are currently treated as dividends in all cases.
It suggested limiting this to individual shareholders only, excluding corporate shareholders to avoid double taxation.
Similarly, it proposed excluding unrealised or uncollected income from retained earnings calculations, where tax is imposed if more than 70 per cent of reserves are transferred, arguing that only realised income should be taxed.
To align tax treatment with accounting standards, BAPLC recommended allowing accrued but unpaid expenses as deductible costs, which are currently disallowed despite being recognised under international accounting frameworks.
The proposal also called for an automated tax refund system with mandatory interest on delays, saying the current manual process affects working capital and undermines confidence.
The recommendations aim to reduce tax distortions affecting listed companies, improve liquidity and encourage more firms to enter the market, while strengthening investment flows and deepening Bangladesh’s capital and bond markets, the association said.
