Budget neither good nor bad for capital market

The proposed budget for the fiscal year 2023–24 has given neither good nor bad news to the capital market investors, stakeholders said.

Although stakeholders demanded some provisions in the new budget to woo investors as well as bring good firms to the market, most of their urges remained elusive in the proposed budget.

Market insiders believe the budget has not reflected the requirements of the stock exchanges, brokers, merchant bankers, listed companies, and investors.

The market had been unstable throughout the month of March despite the securities regulator Bangladesh Securities and Exchange Commission (BSEC) took several attempts to rectify the market behaviour.

Finance Minister AHM Mustafa Kamal placed the proposed national budget of Tk 7,61,785 crore for the fiscal year 2023-24 yesterday evening.

The country’s capital market has completely been overlooked in the proposed budget, market insiders say.

Bangladesh Merchant Bankers Association (BMBA) President Sayadur Rahman told The Business Post that there was basically nothing for the capital market in the proposed budget.

Corporate taxes are still what they were before. In the last financial year, no major company came to the capital market because of the slim difference in corporate taxes for the listed and non-listed companies. So, it is uncertain whether the market will be able to attract good companies in the upcoming fiscal, he added.

The government wants to keep the corporate tax rates unchanged for all sectors for the next fiscal year 2023–24, the finance minister said in his budget speech Thursday.

Currently, the corporate tax rate for listed companies is 20 per cent while it is 27.5 per cent for non-listed companies. These rates are not applicable for banks, insurance companies, non-bank financial institutions (NBFIs), telecommunications companies, or tobacco companies.

The tax rate for listed banks, insurance companies, and NBFIs is 37.5 per cent, while it is 40 per cent for the non-listed firms in the same categories.

Meanwhile, the current tax rate is 20 per cent for listed companies that issue shares worth more than 10 per cent of their paid up capital through an initial public offering (IPO), and the rate is 22.5 per cent for companies that issue shares worth 10 per cent or less of their paid up capital through an IPO.

But in this case, the tax rate would be 22.5 per cent instead of 20 per cent and 25 per cent instead of 22.5 per cent for applicable listed companies if they fail to comply with the conditions that all expenses, investments, receipts, and income, except fixed annual cash expenditure and investment, must be made through bank transfers.

Earlier, from the fiscal year 2020-21 to 2022-23, the corporate tax rate had been reduced by the government.

Earlier, all stock market stakeholders urged a 10 to 15 per cent gap in corporate tax between listed and non-listed companies in the upcoming national budget for the 2023–24 fiscal year to attract healthier firms to the market.

BMBA president said good companies would not come without good facilities; it is natural. In the capital market, they have to follow a set of financial rules. As a result, they would not be eager to get enrolled unless they are given specific opportunities.

According to Asif Ibrahim, chairman of the Chittagong Stock Exchange (CSE), the proposed budget for FY24 is nothing special for the capital market investors.

Talking to The Business Post, he said capital market stakeholders had made various demands, including tax breaks and policy supports but nothing was addressed in the new budget.

To ensure long-term financing from the capital market, required expectations were not met in the budget, he added.

Commenting on the new budget, Md Ashequr Rahman, managing director at Midway Securities said, “There is nothing positive in the proposed budget for investors or even listed companies. The budget does not focus on increasing stock market liquidity. Unfortunately, it seems, as with previous years, that no concrete planning was done for the stock market.”

“It is unfortunate that even in 2023, the stock market does not see anything positive in the national budget. Simple policy changes could help boost investor confidence,” he added.

Richard D Rozario, president of the DSE Brokers Association of Bangladesh (DBA), told The Business Post, “The proposed budget has not given any significant news to the capital market investors.”

“Besides, tax rebate benefits remain unchanged in the budget document due to stabilising the capital market and investment. It is, however, a good news for us.”

Currently, taxpayers are enjoying a 15 per cent rebate on their investments up to a maximum of 20 per cent of their taxable income in the stock market, deposit pension schemes (DPS), life insurance, etc.