Conditional black money shots in the arms no good for ailing stock market, experts

The condition under which undisclosed money or black money was proposed to be allowed for capital market investment in the budget proposal for FY 2020-21 has been further relaxed in the final Finance Bill.

In hopes of revitalising the capital markets, finance minister made the much talked about move to keep the invested black money locked (lock-in) in the capital markets for one year instead of three years.

However, market insiders and experts suggest that the desired goal will not be achieved in the stock markets by injecting black money into it. 

The country's capital markets have not returned to normalcy since the 2010 catastrophe. Despite announcements of various initiatives by the government, investors’ confidence in the markets has not returned.

Investors now can invest illegally earned or secretly saved money in the capital market with only 10 percent tax without sans penalty. The National Board of Revenue (NBR) or other government authorities will not ask any questions regarding the source of the money.

However, those involved in the stock market have been demanding the withdrawal of lock-in or sale ban period.

Along with Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE), Bangladesh Securities and Exchange Commission (BSEC) recommended the withdrawal of lock-in condition. However, black money lock-in period in the capital market has been passed in the parliament for one year instead of three years.

In this regard, Sharif Anwar Hossain, President of DSE Brokers Association of Bangladesh (DBA), a top organization of capital market brokers said, "We wanted the removal of the three-years lock-in period."

Md Rakibur Rahman, director of the Dhaka Stock Exchange (DSE), said no one would invest in the stock market under this condition of legalising black money.

Bangladesh Merchant Bankers Association (BMBA) President Sayedur Rahman said the opportunity to legalize undisclosed income by paying 10 percent tax has been given in the cases of flat purchase, cash deposit, bank deposit, investment in savings certificates and 1-year lock-in in the stock markets. In this case, like other sectors, there should be no lock-in period for investing in the stock market, he suggested.

Mizanur Rashid Chowdhury, president of the Bangladesh Capital Market Investors Unity Council, told The Business Post the market needs liquidity amid current crisis. The government should have lifted all the conditions to invest black money in stocks, he opined. 

Echoing a similar sentiment, capital market expert Professor Abu Ahmed said, there are various debates on the issue of undisclosed money being invested in sectors. Such opportunities to whiten black money failed in the past and we have to live with this reality, he said.

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