The proposed budget for FY25 has brought no good news for the capital market investors. Despite stakeholders demanding 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.
Finance Minister Abul Hassan Mahmood Ali placed the proposed national budget for FY25 at the Jatiya Sangsad on Thursday.
Market insiders believe the budget did not reflect the requirements of the stock exchanges, brokers, merchant bankers, listed companies, and investors.
Stock market investors face a new tax burden in the upcoming FY25. The government has proposed imposing a 15 per cent capital gains tax on income exceeding Tk 50 lakh.
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.” This move reverses a 2015 policy that exempted individual investors from capital gains taxes.
The minister made the proposal to rationalise tax expenditure in FY25.
The budget has also proposed that profits made by any corporate entity other than individual investors by investing in the stock market will be taxed.
Meanwhile, the government proposed to set the corporate tax rate for listed companies at 22.5 per cent in the upcoming FY25 and FY26, up from the existing 20 per cent, with the aim to reduce the tax barrier between listed and non-listed companies to 5 per cent from 7.5 per cent.
Speaking to The Business Post, stock market analyst and former economics professor at the Dhaka University Abu Ahmed said, “The FY25 budget is disappointing for the capital market. Nothing is there for the sector.
“Even if the previous incentive system is kept, now it is far away – all the privileges of the capital market are being removed by imposing new taxes.”
He continued, “The stakeholders give various proposals to the government before the budget, but in reality there is no reflection in the budget. As a result, the efforts of BSEC, DSE or related stakeholders to improve the capital market are killed through the budget.
“Even if the government has a positive attitude towards the capital market, the capital market has no value to those who prepare the budget. As a result, there is no opportunity for investors to make a profit by investing in the capital market.”
Abu Ahmed then pointed out, “The tax difference between listed and non-listed companies was seven and a half per cent. Now it has been brought down to 5 per cent. Then how will it be possible to bring good companies to the capital market?”
Criticising the gain tax, he said, “The gain tax and the tax on dividends are different issues. Gain tax is the profit made by buying shares at a low price and selling them at a high price. And the tax on dividends is mentioned in the income statement.”
Chittagong Stock Exchange (CSE) Chairman Asif Ibrahim said, “To summarise, we believe that the budget structure has been determined considering the global and local economic situations.
“We expect that the issue of a long term financing source to meet the capital market development aspirations under the dynamic leadership of our Prime Minister Sheikh Hasina will get more priority in near future.”
Prime Bank Securities Ltd CEO Md Moniruzzaman said, “In the current capital market status, it is almost impossible to collect from private investors through the budget. Because there are very few investors who can make more than Tk 50 lakh profit in a depressed capital market.
“It is true that the difference in corporate tax between listed and non-listed companies has been reduced. But earlier, there was also a tax differential for such companies. How many good companies have we been able to bring to the capital market?”
Al Amin, another capital market analyst and associate professor of the accounting and information systems department at Dhaka University, said, “The proposed budget did not offer any facilities for the capital market, instead it reduced many.
“The finance minister has offered the facility to whiten undisclosed wealth, while increasing the companies’ corporate tax. The proposed budget also imposes a 15 per cent tax on individual investors who gain Tk 50 lakh capital profits, 10 per cent on sponsor directors instead of the existing 5 per cent.”
He continued, “As such news is covered by newspapers, it severely impacts the capital market. But I think the market will revive as the minister already disclosed everything in the proposed budget.”
Speaking to The Business Post, Managing Director and CEO at VIPB Asset Management Company Shahidul Islam said, “The difference between corporate tax rates of listed and unlisted companies has been narrowed.
“This will reduce the incentives for the unlisted companies to get listed. The depth and growth of the capital market will be negatively affected.”
He added, “Though the newly introduced capital gain tax has some impact on the capital market, it is negligible because Tk 50 lakh of capital gains is exempt from taxes. A very small number of investors are expected to realise over Tk 50 lakh of capital gains in a year.”
Before the budget session began, Dhaka Stock Exchange (DSE) Chairman Prof Dr Hafiz Md Hasan Babu had said, “The stock market is still under pressure due to the post-pandemic shocks and the Russia-Ukraine war.
“Imposing new taxes at this time will only create more pressure on the investors.”
He had made the remark after the National Board of Revenue (NBR) disclosed a proposal to impose a 15 per cent income tax on capital gains, which is currently tax-free.
Hafiz also called for reducing source tax in the FY25 budget, and proposed to decrease the corporate tax on listed companies by 2.5 per cent to 17.5 per cent from 20 per cent.
Commenting on the new budget, Md Ashequr Rahman, managing director at Midway Securities, said, “The proposed national budget for FY25 is a step backward for the capital market, introducing unnecessary tax on investors in the form of capital gain tax.
“This budget is the most detrimental to the capital market in recent years, as it fails to address the significant challenges faced by investors.”
He added, “Since rumors of the capital gain tax began circulating two months ago, the stock market indexes have plummeted. Investors, the DSE, CSE, DBA, and even the BSEC have all asked and lobbied against this unfair tax burden.
“Unfortunately, it seems that they have chosen to ignore the constant suffering of this sector. We have been requesting an increase in the tax rate gap between listed and non-listed companies to encourage good companies to list on the stock market, but this has not been effectively proposed.”
“We have also asked for a reduction in the transaction tax to minimise the burden on investors, but this has been ignored,” Ashequr pointed out.
