How frequent policy shifts hinder companies from going public
If a business gets listed, it will delight in tax benefits, and this is one of the significant incentives for them to go public. However, the federal government’s frequent policy changes have discouraged listed firms many times, as they faced higher tax rates when they got listed. It gave a clear, negative message to all great companies about getting listed in the market. In the Finance Ordinance 2025, the federal government announced that the corporate tax rate for listed firms will be raised to 27.5 percent from the existing 20 percent to 22.5 percent from FY27. The only exemption was for those who unloaded more than 10 percent of shares through going public (IPO). Take the example of paint manufacturer Berger Paints Bangladesh Limited. The international company had unloaded 5 percent of shares through IPO in 2006. Last month, it decided to unload more than 5 percent of shares to the public through rights shares after receiving repeated demands from stock market investors and stock exchanges in order to enhance the supply of great shares. Another incentive was to obtain better tax advantages compared to companies that have unloaded a lower percentage of shares. However, the international company will not enjoy the tax advantage as its IPO share unloading will remain the same even if it raises its share in the market through rights shares. Because only IPO offloading counts, several great companies will need to pay higher corporate tax such as Walton Hi-Tech Industries as it offloaded less than 1 percent of shares through IPO, although it increased share offloading later. The examples of victims of regular policy changes do not end here. Once, listed tobacco-producing companies received more tax benefits than non-listed companies. Now they are under the same tax structure. Grameenphone got listed in 2009 knowing that it would have to pay a corporate tax 10 percentage points lower than non-listed telecom companies’ 45 percent. In 2013, however, the government halved the tax advantage by raising the corporate tax of listed telecom companies to 40 percent. A company can unload shares through IPO only once, said Snehasish Barua, a tax analyst and managing director of SMAC Advisory Services Ltd. So, companies that have already become listed by unloading 10 percent or a lesser percentage of shares have no chance to avail the tax advantage, he said. “This is a disparity for them, as the tax rate will suddenly go up by 5 percent,” he said. Rupali Chowdhury, managing director of Berger, recently expressed her dissatisfaction upon learning this. “We had decided to unload shares based on the NBR’s previous rule. The BSEC (Bangladesh Securities and Exchange Commission) also assured us of the tax advantage,” she said. This sudden change will surely disappoint its investors. “If this kind of frequent policy change continues, how will a company get the incentive to get listed?” she asked. Such systems will discourage all other companies and deter them from getting listed in Bangladesh. Another significant reason for the reluctance to get listed in Bangladesh is the stringent compliance requirements for listed firms, she said. If non-listed firms also faced compliance requirements similar to those of listed firms, it would have encouraged them to go public, she said. The compliance requirements of submitting financial reports and appointing independent directors exist even for non-listed companies in many countries, she added. She emphasized on reducing IPO processing time so that companies can get funds quickly, she added.
