The capital market is a vital part of the country’s economy. Over the past few years, the government has been providing various facilities for the development of the market, which has helped it make visible progress.
However, as the country’s economy continues to grow, the demand for further developing the capital market and making it more investment friendly is also growing.
Hence, the government should give more priority in this regard in the budget for the upcoming fiscal year 2023-24 (FY24), according to Dhaka Stock Exchange’s (DSE) Shareholding Director Sharif Anwar Hossain.
Sharif, who is also the managing director of Md Sahidullah Securities Ltd and former president of the DSE Brokers Association (DBA), made the recommendation while talking to Shakhawat Hossain Sumon of The Business Post recently.
During the interview, he also talked about various other aspects of the capital market and the upcoming budget.
What types of facilities should be given to new companies in the budget?
It is not enough to list any new company. The company must also be a good one, meaning it should have good compliance and business reputation.
All the factors that should be considered in order to list a good company are well known. This is reflected in every budget proposal. However, in reality, good companies want more benefits. The difference in corporate tax rates between listed and unlisted companies should be up to 15 per cent, instead of the seven and a half percent, which is discouraging for good companies.
Listed companies have to conduct business while complying with many rules and regulations. They need to report their business progress to the regulatory body concerned every three months, which includes information on profit distribution.
DSE has proposed reducing the corporate tax rate of listed companies from the existing 20 percent to 15 percent. Many good companies will also be interested in this.
What are your thoughts on undisclosed money investment?
In the previous budget, various suggestions were made for the development of the capital market but many of those are yet to be implemented.
I think that most of the suggestions made by stakeholders should be reflected in the budget.
The government had previously allowed investment of undisclosed money in the capital market. That opportunity no longer exists. The Chittagong Stock Exchange authorities have called on the government to reintroduce the option of investing black money in the capital market.
I do not want to make any specific suggestion in this regard. But it is proven that undisclosed money boosts the liquidity growth of the capital market. The government can revive the opportunity if it wishes so.
What are your recommendations regarding the bond market?
There are only 10 corporate bonds listed on the DSE at present. A few corporate bonds have been approved and issued under private placement.
The DSE, in a proposal to the National Board of Revenue (NBR), sought tax exemptions to strengthen and popularise the bond market.
If the bond market is strong, institutional investors who now invest in the risky secondary market will switch to invest there.
It has been recommended that profits or interests on the income from all types of bonds, including sukuk, be given tax exemption. This will lure in new investors in the capital market.
The proposal to reduce tax on dividends is long overdue. What is your opinion on the matter?
Presently, the tax levied on dividends is considered a double whammy. Because, first the company paying the dividend pays the company tax. Then, when the dividend goes to the investor, they also have to pay tax on that.
This issue has been brought up in every year’s budget. But in reality, no steps are taken.
The issue has been brought up in the budget proposal for FY24 too. Stakeholders demanded that the tax on dividend income of corporate shareholders be brought down to 10 per cent from the existing 20 per cent.