The budget ignores the capital market

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The country’s capital market has been completely neglected in the proposed national budget.

I’m not a big fan of the desirability of allowing free flow of black money into stocks. Because, before, it neither helped the market nor encouraged honest taxpayers.

But, I must mention a few points, which have long been crucial to developing a capital market which would have liked to be the barometer and a central financing of the economy and which the government has continued to ignore.

Listed companies used to enjoy a tax gap of 10 percentage points compared to their unlisted counterparts and in recent years the government has narrowed the gap to 7.5 percentage points, instead of widening it to encourage listing.

The market, its investors but also the economy are suffering from the reluctance of the best performing companies to go public. However, it is still good news that listed companies have been treated at least the same in terms of reducing their corporate tax rate by 250 basis points.

The advance tax on stock market transactions was drastically increased at the beginning of the last decade and the brokerage industry’s annual demand to rationalize it has also been ignored this year, hampering the industry’s efforts to reduce the cost of market transactions and increase market liquidity.

In fact, the budget discouraged investment in capital markets by reducing personal tax refunds on investments.

Dividend income is taxed twice in Bangladesh. First, at source when a company pays dividends, and again when investors go to pay their own taxes. This should have been abandoned long ago to inspire long-term investment, and the continued mistreatment of taxpayer investors is unfortunate.

In a further blow to bond market development efforts, all capital gains from treasury bills were made taxable.

The list of things to do is long, but we can only discuss them once the crucial issues have been resolved.


Minhaz Mannan Emon is Managing Director of BLI Securities Ltd and former Director of the Dhaka Stock Exchange

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