The stock exchanges that were turned into profit-oriented companies through demutualisation last year will be exempt from paying taxes for the next five years, in a budgetary move aimed at strengthening the bourses and capital market activities.

The tax-exempt dividend income was also increased to Tk 15,000 from Tk 10,000 at present at the budget proposed yesterday.

Bangladesh's stock exchanges, before demutualisation, were nonprofit cooperative organisations owned by the exchange members, and were not subject to corporate taxation.

But demutualisation, a way of separating bourse management from ownership, converted the bourses into profit oriented companies owned by shareholders, and 37.5 percent corporate taxes now apply to them as non-listed companies. The demutualisation process also allows for alternative business models and operational efficiency.

This is a positive message for the stock exchanges, said Swapan Kumar Bala, managing director of Dhaka Stock Exchange. "We can now utilise the otherwise taxable money for capacity building, infrastructure development and introduction of new products to attract strategic investors to the bourse," he said.

"The tax exemption will also not affect the government's revenue collection, as the bourses have not paid any taxes yet, being non-profit cooperative organisations before."

On the hike in tax-free dividend income,

Bala said it will reduce the investors' tax burden. "But the investors will have to get tax identification numbers to enjoy the opportunity."

Referring to the stockmarket crash in 2010-11, Finance Minister AMA Muhith said initiatives were taken in the last two fiscal years, including reshuffling of Bangladesh Securities and Exchange Commission, reforms in legal and regulatory frameworks and demutualisation of the stock exchanges, to stabilise the capital market.