Proposal to continue tax holiday facility for demutualised companies at stock markets for next five years will produce no benefit for the investors, according to market analysts.
Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) have put forward a number of budget proposals, including tax holiday, for inclusion in fiscal year 2014-15.
They presented the proposals to the National Board of Revenue last month as the budget is set to be placed on June 5.
“Tax holiday will neither benefit investors nor infuse confidence among the investors,” said Mirza Azizul Islam, former finance adviser to last caretaker government.
However, he backed the stock exchanges’ proposal to reduce corporate tax of the listed companies. “It (cutting corporate tax) will increase profit of the listed companies, and thus investors will get higher dividends. But from 2% to 2.5% can be reduced.”
The DSE and CSE proposed reducing tax rate for banks, insurance companies and financial institutions to 32.5% for listed entities and 37.5% for non-listed entities from the current 42.5%.
About the proposed formation of market stabilisation fund of Tk5,000 crore, former adviser said some South Asian countries have formed such market stabilisation fund in 1996-98 when world stock market was in the downturn, but in most cases such kind of fund eventually made losses.
Referring to Bangladesh Fund of Tk5,000 crore that was formed after market debacle in late 2010, he said, “This fund is yet to be utilised. So, I don’t think any market stabilised fund is needed right at this moment.”
Islam, also a market and financial sector analyst, strongly supported the enactment of the Financial Reporting Act.
Although the Act will have no impact on market, it is important to maintain standard accounts. “Since some companies in the country have a tendency to fabricate their accounts, the enactment of the Act will help rectify the accounts.”
“Everything should be considered on the basis of the interest of the investors and markets rather than individual interest,” Mirza Aziz emphasised.
Besides, the stock exchanges demanded reduction of tax at source on members’ share transaction to 0.015% from the present 0.05%, tax exemption facility for the unrealised capital gain of shares which have been issued to the initial shareholders of the demutualised exchanges.
The proposals included exemption of 1.5% stamp duty on transfer of dematerialised shares, which is currently applicable only on listed entities’ securities, reduction of tax at source on commissions of the stock exchange members and extending the exemption limit of dividend income from Tk10,000 to Tk50,000.
