Considering the depressed state of the capital market and the investment situation of investors in financial distress over the last few years, the DSE Brokers Association of Bangladesh (DBA) has urged the government to withdraw the tax on capital gains proposed in the national budget for FY2024-25.
The platform for trading right entitlement certificate (TREC) holders of the Dhaka Stock Exchange (DSE) also said that the new tax burden will negatively impact an already gloomy market.
Investors are losing confidence in the stock market due to several factors, including the lack of quality IPOs and insufficient transparency and accountability from intermediaries and regulators, DBA President Md Saiful Islam said at a post-budget press briefing at the association’s office in Motijheel on Tuesday.
On June 6, Finance Minister Abul Hassan Mahmood Ali placed the proposed FY25 budget with no good news for the capital market, at a time when the market is passing a critical time amid lingering macroeconomic challenges.
Stock market investors will face a new tax burden in the upcoming fiscal year as the government proposed imposing a 15 per cent capital gains tax on income exceeding Tk 50 lakh.
In his budget speech, the finance minister proposed “to tax any capital gain exceeding Tk 50 lakh received by a natural individual taxpayer from the transfer of shares or units of a listed company or fund.”
The minister recommended the move, which reverses a 2015 policy that exempted individual investors from capital gains taxes, to rationalise tax expenditure in FY25.
Meanwhile, the government proposed to set the corporate tax rate for listed companies at 22.5 per cent in the upcoming FY25 and FY2025-26, up from the existing 20 per cent, to reduce the tax barrier between listed and non-listed companies to 5 per cent from 7.5 per cent.
Sector people said that the market index dropped because investors did not find any positive steps in the budget for them.
At Tuesday’s press conference, DBA President Saiful said, “The DBA does not oppose capital gain tax for the stock market. However, this is not the right time for this. It has already had a negative impact on investors amid the economic crisis.
“So, we want an exemption for one year from the capital gain tax, considering the situation of general investors.”
He also presented a seven-point list of demands, calling for reconsidering key proposals in the final budget. These proposals include the withdrawal of the capital gains tax, creating a roadmap for listing state-owned companies, a tax waiver for new beneficiary owners, and reducing the tax rate on commission income from share transactions by brokerage firms.
The last 14 years have seen no good IPOs in the capital markets, which is a source of frustration for investors. Because of this, investors are leaving the capital market. There is no substitute for a good IPO to maintain market momentum, said Saiful, also the director of BRAC EPL Stock Brokerage Limited.
He said that the prime minister has recently given an order to enlist the state-owned companies in the capital market. “We thought that this year's national budget proposal would have a direction in this regard, which would make investors interested in investing in the market. However, no direction has been given in the budget.”
The DBA president called for allowing new BO accounts to operate tax-free for three years, which would create new investors in the market.
He also said, “We request that NBR allow margin losses to be tax deductible by providing an incentive to lenders to financially recover investments at margin losses and increase market participation.”
“Has the stock exchange improved in the last 10 years after demutualisation? If not, the Demutualization Act should be reviewed. We think it is time to review the act,” he added.
