Tax proposals to hinder capital market growth
Tuesday, 15 June 2010
FE Report
Chittagong Stock Exchange (CSE) has opposed some of the budget proposals, saying proposed tax at source on brokerage commissions and capital gain tax on institutional investors would hold back the growth of the market.
"The proposals will affect the market growth," said Fakhor Uddin Ali Ahmed, CSE president, at a post-budget reaction in the city Monday.
Untimely slapping of tax on brokerage commission will be an additional burden on the investors, leading to an increase in the cost of doing business and direct negative impact on transactions, he said.
"Besides, it will affect expansion drive of brokerage houses, meaning an end of employment generation through the same. The brokers might now give a second thought to their plans to open new branches," he said.
Ahmed said, the government should consider measures that would help increase the volume of trade manifold. This would help collect more tax at source.
"Last year collection of tax at source was higher by 600 per cent due to increase in the volume of trade," he said.
Presently, the brokerage houses collect Tk 0.04 as commission from every transaction worth Tk 100.
The CSE chief suggested keeping present tax on brokerage commission unchanged. The brokers pay Tk 0.025 to the government exchequer and keep the rest to themselves.
He said the proposed tax rate of 0.1 per cent represents a 300 per cent hike, meaning the brokers would need to collect Tk 0.12 as commission on every transaction worth Tk 100.
In his second budget speech, Finance Minister AMA Muhith Thursday proposed to impose a ten per cent tax on companies trading in shares and tax at source on commission collected by stockbrokers.
He also proposed five per cent tax on income of sponsor shareholders or directors of companies engaged in trading in the Dhaka and Chittagong stock exchanges and three per cent tax on the shares of companies sold at a premium value.
CSE president said, "Imposing tax on corporate bodies, sponsors and directors will go against the sustainable development of the capital market."
"It may also discourage corporate investment in the capital market from home and abroad," he said recommending a cut in the proposed tax on companies trading in shares in the bourses to three per cent from proposed 10 per cent.
Ahmed said the government has proposed a three per cent tax on the premium received from sale of shares.
"The premium is a part of the company's capital, not income. So, the government should rethink about it," he said.
About state-owned enterprises (SoEs), Ahmed said although five SoEs have been brought to the capital market starting from 2006, no timeframe has been declared for the 26 SoEs to come to the capital market.
Chittagong Stock Exchange (CSE) has opposed some of the budget proposals, saying proposed tax at source on brokerage commissions and capital gain tax on institutional investors would hold back the growth of the market.
"The proposals will affect the market growth," said Fakhor Uddin Ali Ahmed, CSE president, at a post-budget reaction in the city Monday.
Untimely slapping of tax on brokerage commission will be an additional burden on the investors, leading to an increase in the cost of doing business and direct negative impact on transactions, he said.
"Besides, it will affect expansion drive of brokerage houses, meaning an end of employment generation through the same. The brokers might now give a second thought to their plans to open new branches," he said.
Ahmed said, the government should consider measures that would help increase the volume of trade manifold. This would help collect more tax at source.
"Last year collection of tax at source was higher by 600 per cent due to increase in the volume of trade," he said.
Presently, the brokerage houses collect Tk 0.04 as commission from every transaction worth Tk 100.
The CSE chief suggested keeping present tax on brokerage commission unchanged. The brokers pay Tk 0.025 to the government exchequer and keep the rest to themselves.
He said the proposed tax rate of 0.1 per cent represents a 300 per cent hike, meaning the brokers would need to collect Tk 0.12 as commission on every transaction worth Tk 100.
In his second budget speech, Finance Minister AMA Muhith Thursday proposed to impose a ten per cent tax on companies trading in shares and tax at source on commission collected by stockbrokers.
He also proposed five per cent tax on income of sponsor shareholders or directors of companies engaged in trading in the Dhaka and Chittagong stock exchanges and three per cent tax on the shares of companies sold at a premium value.
CSE president said, "Imposing tax on corporate bodies, sponsors and directors will go against the sustainable development of the capital market."
"It may also discourage corporate investment in the capital market from home and abroad," he said recommending a cut in the proposed tax on companies trading in shares in the bourses to three per cent from proposed 10 per cent.
Ahmed said the government has proposed a three per cent tax on the premium received from sale of shares.
"The premium is a part of the company's capital, not income. So, the government should rethink about it," he said.
About state-owned enterprises (SoEs), Ahmed said although five SoEs have been brought to the capital market starting from 2006, no timeframe has been declared for the 26 SoEs to come to the capital market.