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Budgetary support needed to turn stock market around: DSE, CSE chiefs

FE REPORT | June 05, 2023 00:00:00

The stock market has the potential to become the main driving force of the economy but it could not be taken advantage of in absence of proper policies, said the chief of the Dhaka Stock Exchange (DSE).

"If we get policy support from the government," the capital market will become the preferred source of long-term financing, said DSE Chairman Hafiz Muhammad Hasan Babu while speaking at a post-budget discussion.

The existing heavy reliance on banks for long-term financing should be reduced, he added. The event was organised by the Bangladesh Merchant Bankers Association (BMBA) and the Capital Market Journalists Forum, where stakeholders expressed disappointment over the proposed budget that suggests no policy-wise change to steer the bearish market on a growth path in the next fiscal year.

Mr Babu reiterated the demand for widening the tax rate gap between listed and non-listed companies.

"The government should meet at least this one demand to encourage reputed companies to get listed in the stock market."

Currently, listed firms other than banks, insurers, financial institutions, mobile operators, and tobacco companies, which issued more than 10 per cent shares, pay 20 per cent corporate tax while their non-listed competitors pay 27.50 per cent tax.

More revenue will be generated despite the proposed cuts in corporate taxes if more companies come to the market as listing in the stock market entails strict regulatory compliance, Mr Babu added.

Only good part of the proposed budget is that it will not bring in any additional tax burden for listed companies as well as investors, said Sayadur Rahman, president of the Merchant Bankers Association.

He insisted on widening the tax-rate gap to at least 15 per cent between listed and non-listed companies.

There are some additional costs in getting listed in the stock market; hence the corporate tax gap should be higher, said Mr Rahman.

He demanded withdrawal of double taxation on dividends too.

At present, tax on dividends is deducted at source and taxpayers again pay income tax against dividends in case one's annual dividend income crosses Tk 50,000.

The president of the Bankers Association also urged the government to bring down tax on share transactions to 0.015 per cent from the existing 0.05 per cent and to keep bonds and mutual funds investment out of the banks' capital market exposure limit.

He also urged removal of Advance Income Tax (AIT).

Planning Minister MA Mannan, who was present as the chief guest at the event, said a strong stock market would serve as a significant source of capital supply in developing economies like Bangladesh.

"It is not right to neglect the stock market in the budget."

The minister assured stakeholders that he would emphasise in parliament the need for withdrawal of advance income tax (AIT) to promote investments in the stock market.

AIT is no longer needed given the improved efficiency of the National Board of Revenue (NBR), technological advancements, and that the business community has become stronger than before, said Mr Mannan.

He extended his support to the demand for withdrawal of double taxation and widening of the tax gap.

Asif Ibrahim, chairman of the Chittagong Stock Exchange, said the stock market is a better source of long-term financing, not banks.

The government should ensure that multinational companies get listed on the bourses, he added.

Richard D'Rozario, president of DSE Brokers Association of Bangladesh, said small companies should be given opportunities to raise capital for making the country's economy dynamic.

"The budget is not just an income-expenditure account but is determined by political philosophy," said Journalists' Forum President Ziaur Rahman.

The exclusion of the stock market from the budget sends a negative message to investors that the government does not give much priority to its development, he added.

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