Little attention paid to capital market in budget

The capital market of the country received less importance in the proposed national budget for the fiscal year 2022–23, stakeholders said at a hybrid seminar. 

They urged a minimum 10 per cent gap in corporate tax between listed and non-listed companies in the upcoming fiscal year to attract good firms to the bourses. 

Speakers made the observation at a hybrid seminar on ‘Budget FY23: Implications for the Capital Market’ on Tuesday.

The seminar was organized by the Bangladesh Institute of Capital Market (BICM). Suborna Barua, Research Fellow of the BICM and Associate Professor of the University of Dhaka, presented the keynote paper at the seminar presided over by Mahmuda Akhter, Executive President of the BICM. 

The Dhaka Stock Exchange Chairman, Md Eunusur Rahman as a panelist at the event said in the proposed budget, the government paid less attention to the country’s capital market. “We did not see the reflection of our expectations.” 

For the upcoming fiscal year 2022–23, Finance Minister AHM Mustafa Kamal on June 9 proposed reducing corporate tax rates to help achieve the private investment-to-gross domestic product (GDP) ratio target.

The minister set some conditions for reduction of tax rates to 20 per cent from 22.50 per cent for listed companies.

More than 10 per cent of its capital must be raised via an IPO, all receipts must be collected through banking channels and cash expenses and investments cannot exceed Tk12 lakh, the minister said.

Kamal also proposed reducing the corporate tax rate for non-listed companies from 30 per cent to 27.5 per cent.

Suborna Barua said in his keynote paper if the listed companies fulfill condition number one but not condition two, the tax rate will be 22.5 per cent and if they do not fulfill both conditions, the tax rate will be 25 per cent.

The DSE Chairman proposed increasing investors’ tax-free dividend income limit to Tk1 lakh from the
existing Tk50, 000.

According to Suborna Barua, the dividend income tax for individual investors will discourage capital market investments.

At present, bad debt written off by a bank or financial institution is tax-exempt for all taxpayers. The bad debt written off for all types of taxpayers, except for individuals, will be considered taxable income for the loan default concerned.

The measures will assist the capital market, he said.

He also said there should be financial incentives for capital market intermediaries to make them work more actively for the betterment of the capital market.

Taxes on dividend income should be exempted to create a long-term investor pool in the market and lower interest on government securities to convert savings into investment, he added. 

Professor Mohammed Helal Uddin, Director of Research of the CIRDAP, said the initial public offering (IPO) should be reduced in the current situation of the stock market. At the same time, if this news is given in the market, then investment will increase.

Undisclosed money has never been a significant investment in the capital market. However, if this money is given the opportunity for investment, it has a psychological effect, he said.  

Asif Ibrahim, Chairman of the Chittagong Stock Exchange and ZiaurRahman, President of the Capital Market Journalists’ Forum, were also present at the seminar.