Source tax on
dividend income
Almost all local origin listed companies have been paying a negligible portion of earned net profits as dividends and transferring major portion of profits to reserve accounts as retain earnings depriving shareholders. But multinational listed companies have been paying major part of earned profits as dividends and keeping very small portion of earned profits in reserve accounts. As number of multinational companies as well as shares of those companies are very limited investors are buying local companies shares. Government has been imposing 15% source tax on dividend income when the shareholder do not posses Tax Identification Number ( TIN) and has been imposing 10% source tax on dividend income when shareholder have a TIN. Government declared tax free ceiling on dividend income for individual Tk50,000/ but owing to source tax most of the shareholders ( are small investors) can not avail that tax free limit as their dividend income in most cases are less than Tk50,000/ in total and source tax are cut by the companies before disbursing dividends.
Government has given Tex free ceiling on dividend income to encourage people for buying shares and Mutual Fund units to vibrate capital market. Source tax on dividend income for individual is barrier to that incentive. As local companies are inflating reserve at the cost of shareholders dividends and regulator is not protecting shareholders to get optimum dividends millions of small money savers are not investing in capital market.
In this backdrop, I like to urge NBR to reduce source tax on dividend income from 10% to 5% for TIN holders and from 15% to 10% for those who do not have TIN it will increase net dividend income of individual investors and bring more small money savers to invest in capital market.
Md Ashraf Hossain
Middle Bashabo, Dhaka
