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3 shots in the arm of ailing stocks

Sarwar A Chowdhury
The troubled stockmarket will get three more incentives in the next fiscal year, in addition to the existing ones, as part the government's efforts to strengthen and stabilise the capital market.
Dividend income of up to Tk 5,000 will be exempted from tax. It comes as welcome news for share investors, many of whom have suffered huge losses from market downswings since January last year.
Currently, dividend income is added to the main income of an individual and the tax is calculated on the total amount.
The finance minister yesterday offered
a 10 percent tax rebate for companies that would float 20 percent shares of paid-up capital through initial public offering (IPO).
He also proposed reducing the income tax rate of merchant banks from 42.5 percent to 37.5 percent to help increase their profitability.
The incentives currently enjoyed by stock investors include scope for investing undisclosed money in the share market on payment of a 10 percent tax, tax exemption on mutual fund incomes and a reduced tax of 0.05 percent on brokerage commission.
Dhaka Stock Exchange President
Rakibur Rahman said the new incentives would have a positive impact on the market as well as the investors.
“Tax exemption on dividend income will attract new investment in the market that now faces a severe liquidity crisis. And the tax rebate on the IPO will encourage non-listed companies to get listed with stock exchanges,” he said.
Faruq Ahmad Siddiqi, former chairman of the Securities and Exchange Commission, however, said in the past, the revenue policy had only short-term impacts on the capital market, notlong-term impacts.
“Though the tax exemption on dividend income is a good initiative, the question is how much it will benefit the investors or the market."
Similarly, it is uncertain how many companies will take the tax rebate opportunity through the IPO, he said.
“Many incentives, including lower corporate tax for listed companies, are already there.”
He said the reduction in income tax of merchant banks was a good step, as it would increase their profitability.
“Again, there is a doubt about how much it will benefit merchant banks when their profitability is suffering in the current market situation.”