Finance Bill for FY20 passed with some tax changes backed by Hasina

Parliament has passed the Finance Bill for 2019-20 fiscal year with some changes related to taxes and recommended by Prime Minister Sheikh Hasina.

The changes include tax on stock dividends, retained earnings and reserves of listed companies.

The MPs passed the Bill after Hasina made the recommendations on the proposed budget on Saturday.

On June 13, Finance Minister AHM Mustafa Kamal unveiled a Tk 5.23 trillion spending plan for fiscal 2019-20, which is an 18 percent increase from the revised budget of the outgoing fiscal year.

The budget proposed to impose 15 percent tax on stock dividends for the new fiscal year to protect the investors’ interests.

“Some of the business community objected to it as the banks cannot issue cash dividends to raise their paid up capitals in line with the Bangladesh Bank rules,” the prime minister told parliament.

Taking the matter into consideration, she proposed that if any company offers stock dividend, it will also have to offer equal amount of cash dividend.

If the company's stock dividend is more than the cash dividend, 10 percent tax will be slapped on stock dividend, she said.

The budget also proposed imposition of 15 percent additional tax on so much of retained earnings and reserves as it exceeds 50 percent of the paid up capital of the company.

“In this context, some of the business entrepreneurs also objected. So, I propose any listed company will be able to transfer maximum 70 percent of its net profit after tax to retained earnings and reserves in any financial year. That means at least 30 percent dividend will have to be offered.

If any company fails to do so, 10 percent tax will be levied on retained earnings and reserves."

The prime minister also recommended bringing some changes to VAT.

In view of the poor and marginal population, the prime minister proposed specific tax rate of Tk 4 per kg instead of 5 percent VAT on cotton yarn used in the weaving industry.

Besides, the tariff will be revised in some cases at the import level, according to the prime minister.

She also asked the finance minister to amend some parts of the revenue plan.

After the finance minister accepted all the recommendations made by the prime minister, the Finance Bill for FY20 was unanimously passed in parliament.

Hasina moved the Finance Bill in parliament on behalf of the finance minister as he is yet to recover from his illness, which had prompted the prime minister to take over the budget presentation from him earlier.