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Dhaka Tribune

Govt tax receipts from DSE rose in April

In April, the prime bourse was open for business for a total of 18 days. The market rose during 12 working days and decreased in the remaining six

Update : 23 May 2023, 08:54 PM

Despite an increase in revenue from the previous month, the government's tax revenue collection from the Dhaka Stock Exchange (DSE) has declined compared to last year.

DSE data shows that the government's revenue from DSE grew by Tk2.46 crore in April compared to March.

On the other hand, the government's revenue collection from the DSE decreased by Tk1.80 crore year on year (YoY). 

In April, the prime bourse was open for business for a total of 18 days. In these 18 days, the market rose in 12 working days and decreased in the remaining six working days.

In April

In April, 1.87 million Beneficiary Owners (BO) investors bought and sold Tk10,296.29 lakh crore worth of shares, mutual funds, and bonds. 

From there, the government's tax receipts totalled Tk19.99 crore.

The DSE has deposited this sum with the National Board of Revenue (NBR) in the government treasury.

In March

In the previous month, the total transaction on the DSE in shares, mutual funds, and bonds was 9,406.41, while the government's tax earnings were Tk17.52 crore.

According to data, the government's tax revenue earned from members of stock exchanges or trading rights entitlement certificate holders' commission grew to Tk9.7 crore in April from Tk8.3 crore in March. 

Tax revenue from sponsor-director and placement holder share sales increased by Tk10.3 crore in April, up from Tk9.7 crore in March.

Year-on-year comparison

In April 2022, 12,105.12 crore shares were bought and traded on the DSE. 

The government revenue collection from there was Tk21.79 crore. 

That indicates revenue has reduced by Tk1.80 crore year on year.

What market insiders say

Investors were not confident enough to pump new cash into stocks with a bleak market outlook during a period of rising inflation, resulting in a lesser turnover, according to a merchant banker who requested anonymity.

Earnings are related to turnover, says the merchant banker. If turnover falls, tax is likely to fall. As turnover fell during the review period, so did the tax.

According to market participants, the stock market has continued to struggle over the last ten months, and low share sales by sponsor-directors have exacerbated the problem, resulting in a 40% drop in daily average turnover to Tk680 crore.

The market action was mostly driven by stocks of select companies, while most investors remained on the sidelines due to economic concerns in the country and floor price limits, they noted.

According to market insiders, more than two-thirds of the businesses' share prices were trapped in their floor pricing, which the Bangladesh Securities and Exchange Commission implemented in July 2022 to prevent any significant market drops.

According to them, the floor pricing structure limited investors' entry and exit choices, causing a large portion of their capital to be trapped in the market.

They noted that because tax revenue is tied to market turnover, the reduced turnover has resulted in a decrease in the government's revenue earnings.

Tax rules

The government earns revenue from two types of share trading, according to the Income Tax Ordinance. 

One option is to charge brokerage firms for purchasing and selling investors' shares.

The other is money from trading the company's founder directors' shares. 

The DSE collects and deposits tax on Trading Right Entitlement Certificate (TREC) holders' commission and share sales on behalf of the government at rates of 0.05% and 5.0%, respectively.

However, the government's revenue earnings from the DSE in FY 2020-21 reached a 10-year high of Tk266 crore, as DSE turnover reached a decade high in a few trading sessions throughout the fiscal year.

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