FY26 budget to bring policy support to revive stock mkt

Muhammad Ayub Ali :

The government is preparing a series of policy and tax reforms in the upcoming FY2025-26 national budget aimed at revitalising Bangladesh’s capital market and restoring investor confidence, according to officials from the Finance Division and the National Board of Revenue (NBR).

Key proposals under consideration include expanded tax exemptions for retail investors, reduced corporate tax rates for listed companies, and increased tax burdens on unlisted firms to encourage public listings. The reform package is designed to stimulate market participation and attract new listings, particularly from large corporates and state-owned enterprises.

One of the major proposals is to establish a minimum 10 per cent corporate tax differential between listed and unlisted companies. Currently, listed banks, insurers, and financial institutions face a 37.5 per cent tax rate, compared to 40 per cent for their unlisted counterparts. By increasing the gap to 5 per cent, the government aims to incentivise companies-especially multinational corporations and state-owned firms-to go public.

The NBR is also considering raising the corporate tax rate for mobile network operators from 45 per cent to 50 per cent. The move is intended to encourage telecom companies such as Banglalink and Teletalk to list on the stock exchange and benefit from lower rates applicable to publicly traded firms.

Under current regulations, listed companies that float more than 10 per cent of their shares through initial public offerings (IPOs) are taxed at 20 per cent, while those with less than 10 per cent floatation are subject to a 22.5 per cent rate.

Industry leaders have proposed widening this differential to as much as 15 per cent to further encourage listings. Additionally, there are calls to require stock market listings for companies receiving more than Tk 10 crore in tax incentives.

The Bangladesh Securities and Exchange Commission (BSEC) has proposed offering tax holidays to newly listed companies-a move aimed at attracting fresh market entrants.

Market analysts believe that, if implemented, the combination of fiscal incentives and regulatory reforms could significantly boost investor sentiment and enhance market depth.

The government’s broader reform drive is supported by the Capital Market Reform Task Force, which has submitted its final recommendations. Among the key proposals is a reallocation of IPO shares – raising the portion for general investors from 50 per cent to 60 per cent, while reducing the allocation for eligible institutional investors to 40 per cent. The adjustment aims to make IPOs more accessible and increase retail investor participation.

Reforms to mutual fund regulations have also been introduced. Under current rules, closed-end funds are liquidated after their defined term. The revised framework will now allow conversion to open-end funds if 75 per cent of unit holders approve the move at an Extraordinary General Meeting (EGM).

Investment diversification rules have been relaxed to support broader portfolio exposure. The cap on investment in a single stock has been raised from 10 per cent to 15 per cent, while the sectoral limit has increased from 25 per cent to 30 per cent.

Analysts say the proposed measures, if effectively implemented, could mark a critical turning point for Bangladesh’s capital markets – driving transparency, increasing investor participation, and laying the groundwork for long-term sustainable growth.