Tax exemption to boost alternative investment

Say fund managers

Jannatul Islam

29 April, 2021 12:00 AM printer

Policy supports including tax exemption for a period will help alternative investment in Bangladesh flourished, said local fund managers.

They said this is a new type of investment and thus needs supports like tax facilities from the government.

While talking to the Daily Sun, they came up with the observations ahead of ahead of the upcoming fiscal year’s budgetary plan.

The fund managers said the alternative investment is at its nascent stage, and for its expansion, tax system reforms are also required removing its structural complexities.

The business leaders in the venture capital and alternative investment proposed a dedicated “fund of fund” from Bangladesh Bank to encourage the segment like mutual fund.

“The government should provide tax exemption to the venture capital fund managers for expansion of the alternative investment in the country,” said Shameem Ahsan, president of Venture Capital and Private Equity Association of Bangladesh (VCPEAB).

He drew the previous examples in the national budgets that the government took some supporting policies for venture capital and private equity industry.

 “VCPEAB believes that if the policy makers address the issues in the upcoming budget, it will be greatly helpful for the sector’s going forward,” added Shameem Ahsan, also a general partner at Pegasuss Tech Ventures.

He said the alternative fund managers could be provided with a complete exemption from income tax or entitled to a reduced tax rate for a period of 10 years, considered a standard period for VC-PE firms to get a return from their investment.

“Investments by High Net-worth Individuals (HNI) in alternative investment funds can be given tax exemption like investment in insurance and other types. Also, tax rebate can be given to the investors for investment from provident fund,” said Shameem Ahsan said.

He said the government should formulate a dedicated scheme worth of Tk 2 billion for alternative investment from Bangladesh Bank to flourish the segment. More than 10 alternative fund managing firms have been working in Bangladesh in collaboration with local and international investors.

This investment is a new financial concept covering mainly two types of finance — venture capital (VC) and private equity funds.

VCPEAB General Secretary Shawkat Hossain put emphasis on inclusion of venture capital funding into the allowable investment to inspire individual and corporate investors in the country.

“The government provides tax rebate on different investments like DPS or mutual fund. As the new type of funding, the investors of venture capital should also be given a tax rebate on investing in any portfolio company. It will encourage individual-level angel investors and corporate companies to engage in alternative investment,” Shawkat Hossain, also director of financial Inclusion and investments at LightCastle Partners, told the Daily Sun.

He said the government should keep the fund managers out of tax net to encourage the new type of investment, which became familiar in Bangladesh only in 2016.