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No fresh incentives for stock investors

Sarwar A Chowdhury
Stock investors may not receive any new incentives in the next fiscal year, but the existing ones will continue, according to an early indication from the finance ministry and the National Board of Revenue.
Incentives currently enjoyed by the investors include the scope for investing undisclosed money in the stockmarket, but with a 10 percent tax, tax-exemption on mutual fund incomes and a reduced tax of 0.05 percent on brokerage commission.
“The incentives that are now in place are enough for the market. There is no need to give any further incentives to the market,” said Faruq Ahmad Siddiqi, a former chairman of the Securities and Exchange Commission.
He said the market cannot achieve sustained growth or be stabilised if new incentives are given every year.
"Leave it to the market forces,” Siddiqi said.
However, Akter Hossain Sannamat, a chartered accountant and a market analyst, is of adifferent view.
He said the government should devise new incentives in the upcoming budget to address the downward trend of the market that has been continuing for the last one
and a half years.
Investments of untaxed money in the market
are to continue at a flat tax rate. However, the government should make it clear how long the investment of undisclosed money in the market will be allowed, he said.
"Tax rebate for listed companies should be increased to encourage new companies to get listed on the bourses,” he added, suggesting a tax gap of 10 percentage points between listed and unlisted companies.
Dhaka Stock Exchange in its budget proposal urged the govern-
ment to keep dividend income of up to Tk 25,000 tax-free to appease retail investors who lost money from market downswings last year. Individual with yearly income of up to Tk 10 lakh is considered to be a retail investor.
Presently, dividend income is added to the main income of an individual and the tax is calculated on the total amount. At present, a 10 percent tax deducted at source is also set in the dividend income.
The DSE also called upon the government to give a 50 percent tax rebate if a retail investor invests a minimum of Tk 50,000 in the stockmarket.
The premier bourse also proposed to the government to reset corporate tax at 37.5 percent for all listed companies, as banks, nonbank financial institutions (NBFIs) and insurance companies currently pay such taxes at 42.5 percent.
The DSE would like a gap of 5 percentage points between the listed and non-listed banks, NBFIs and insurance companies.
The bourse also requested the government to reduce the tax on brokerage commission from existing 0.05 percent to 0.015 percent to reduce the cost of transaction — a move that will increase trade volume and related taxes.
The DSE also asked the government to make it mandatory for companies to issue initial public offerings ofTk 10 crore and above through the stock exchanges' depository network from next year.
The Dhaka bourse said the move would simplify the IPO process and lower costs.
The Chittagong Stock Exchange also in a separate budget proposal urged the government to set tax on brokerage commission at 0.015 percent, instead of the existing 0.05 percent.
It also requested the government to give a 15 percent tax rebate for one fiscal year if any company lists on the stock exchanges, which, the bourse believes, would encourage profitable and multinational companies to be listed.
To encourage long-term institutional investment in the market, the Chittagong bourse urged the government to revise the 10 percent tax on capital profit of share sale by institutions.
The tax rate should be 7.5 percent, if any institution holds investment from one year to two years, and 5 percent for more than two years.
The port city bourse also asked the government towithdraw3percenttaxonsharepremium.
sarwar@thedailystar.net