THE Finance Minister blamed the manipulators for destabilising the country’s stock markets. He described them as “fatkabaz” (speculators). The FM called the country’s share market investors as ‘touts’, reported different news media on Friday. By now, the countrymen have become habituated to such frequent ‘charitable remarks’ made by the Finance Minister. Conversely, the investors have gained the ability to bear a bearish stock market since the 2010 scam in which the small investors lost their capital and became almost totally divested. The post bubble scenario was so painful that some investors even committed suicide being frustrated after that market collapse.
However, most marginal investors still survived by stockpiling a hope of a reversal and thus regaining some relief. But the proposed budget (FY 2014-15) has upset them again as this year’s budget has no incentive worth mentioning for the ailing stock market. Moreover, the announced budget declared tax on capital gains from share sales of individual investors in the upcoming fiscal year. The 3 percent tax on capital gains from share sales, which comes as part of the government’s efforts to meet its ambitious revenue target, will be applicable to any investor whose gain exceeds Tk 10 thousand and will be deducted at source. It does nothing but discourages the small investors and pushes them to the wall. Market insiders have already termed the proposed budget ‘not capital market friendly’. They pointed at some discouraging issues, especially the capital gains tax introduction at an individual level when the market is shaky. On top of that, the government also proposed to raise tax rates for listed companies which is giving less than 10 percent dividends, from the existing 27.5 percent to 35 percent. These tax initiatives will whet the interest of private entities to be listed in the bourse and consequently will generate an environment to inject fresh funds in the market.
Meanwhile, the Paris-based global capital watchdog Financial Action Task Force (FATF) warned Bangladesh of risking re-inclusion in the grey list because of monitoring lapses by the share market operators to check shady transactions and money laundering. Bangladesh got out of the global financial watchdog’s grey list in January this year, due to which there has been a great reduction in the cost and time of financial transactions with the rest of the world.
We would like to share the recommendations given by the boards of the two stock exchanges. Those suggestions include – tax holiday facility for next five years, withdrawal of proposed gains tax on individual earnings, cancellation of new rules on realisation of tax at source on trade by shareholders of stock exchanges, and fixing ceiling of tax-free income of investors from Tk 15,000 to Tk 50,000. The proposed 5-year tax-holiday relief for the DSE will not help the stock market in any way except to help increase the DSE’s profits. These relieves should be offered to the retail investors, not to any intermediary firm. The government must withhold the idea of levying capital gain taxes, at least for the coming couple of years.
