Both stock exchanges of the country urged the government Saturday to reconsider the tax measures proposed in the budget for the fiscal year (FY) 2014-15 for the capital market.
According to them, the measures might leave negative effects on market operations and investors' sentiment.
At post-budget press briefings separately arranged by the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE), they made the plea for reconsideration of the tax measures.
"The budget proposals will be reflected in tomorrow's (Sunday) share trading," said DSE Managing Director Dr Swapan Kumar Bala Saturday in an answer to a question whether the proposed budget is capital market-friendly.
Both the stock exchanges, however, expressed their optimism that changes might be brought in the proposals before parliament endorses the budget for the sake of the ongoing growth of the capital market.
"We welcome the budget as the proposed one is not the last thing. We will continue discussions with the government for reconsidering the proposals," said DSE Chairman Justice Siddiqur Rahman Miah.
The exchanges said among the proposals, imposition of 3.0 to 5.0 per cent tax on the gains incurred by individual investors, 15 per cent tax on transfer of shares by the shareholders of exchanges might evoke 'reactions' in the capital market.
They also expressed dissatisfaction over ambiguity over tax exemption facilities for five years at a graduated rate for demutualised stock exchanges. It was not clear whether the exchanges will enjoy tax exemption or come under the tax net within five years, they said.
Mr Bala said the tax proposed on the capital gains of individual investors was not technically feasible and it would hinder the market's growth.
CSE Chairman Dr Muhammad Abdul Mazid said it might not be possible to deduct the capital gains tax if the investors quit the market before the year ends.
"Many TREC (trading right entitlement certificate) holders -- the exchange members -- have told us that it's not possible for them to deduct the capital gains tax due to technical barriers. At the same time, the investors will not welcome the tax on their gains," said Mr Mazid at the press briefing held at the CSE's Dhaka office.
In this connection, Mr Bala said they already talked to top policymakers that the proposed capital gains tax was not functional.
"In the real sense, the proposal is not functional as an investor can remove his/her shares from one brokerage house to another by opening a link account," Bala said urging the government to keep individuals tax-free.
In the budget proposals, the government proposed the deduction of taxes at rates between 3.0 per cent and 5.0 per cent from the gains realised by individual investors of the capital market.
The Finance Bill 2014 said any person, not being a company or firm or a sponsor shareholder or director of a company or a placement holder of a company or a mutual fund, will have to pay tax at the rate of 3.0 per cent of the realised gains if his/her gains exceed Tk 1.0 million but do not exceed Tk 2.0 million.
And the individual investors will have to pay tax at the rate of 5.0 per cent of the realised gains, where such gains exceed 2.0 million.
In his speech, Mr Mazid said the capital market does not give revenue but helps the economy to be dynamic by creating opportunities of raising funds for both the government and the private sector.
"That's why we are proposing reconsideration of the proposals mentioned in the Finance Bill," Mazid said.
He said the government proposed to reduce the 37.5 per cent corporate tax of non-listed companies to 35 per cent.
"It's a discriminatory proposal as no reduction of corporate tax has been proposed for the listed companies," he said.
The CSE chairman also proposed retention of the facility of black money whitening so that such money becomes part of the economy. "If the government is determined to create no room for black money anymore, then the existing provision of black money whitening should be erased completely," Mr Mazid added.
Both the exchanges, however, hailed the reduction of tax at source to 0.30 per cent from the existing 0.50 per cent on the companies' business turnover, the proposal of introducing the Financial Reporting Act, the expenditure on CSR (corporate social responsibility) extended up to Tk 120 million from the existing Tk 80 million to enjoy tax rebate.
