The proposed national budget for FY21 has failed to satisfy expectations of investors in the stock market who sought an unconditional money whitening facility in the final budget for a turnaround in the moribund share market.
Talking to Dhaka Tribune, stock traders said the proposed budget failed to meet investor expectations as the government has allowed the investment of money in the capital market from undisclosed sources, but with certain conditions.
Besides, they said the proposed budget also reduced the tax gap between listed and non-listed firms, putting further stress on the efforts of securities regulators to attract profitable businesses to the capital market.
The gap between listed and non-listed firms has been proposed at 7.5% for the next fiscal year, which is now 10%.
DSEX, the broad index of the Dhaka Stock Exchange (DSE), shed 9 points in the last two sessions.
On Thursday, Finance Minister AHM Mustafa Kamal tabled a national budget of Tk568,000 crore in parliament for the next 2020-21 financial year.
The proposed budget has allowed investment of money from undisclosed sources in the stock market on condition that the investment be made with a 10% tax and be put under a three-year lock- in period.
EBL Securities Limited in its post budget market commentary said the proposed budget failed to boost investor confidence as they found nothing encouraging in it for the development of the share market or to attract investors to the capital market.
Meanwhile, the worsening pandemic situation has made the market almost buyer-less in recent days as the outbreak is going to put a long-lasting adverse impact on the country's economy, it also said.
Salauddin Sobuz, a general stock investor, told Dhaka Tribune: “We were hopeful with the draft budget which shattered our dreams.”
"We, the general investors, hoped the government would reduce the trading tax and BO account fee to give small investors some respite amid the pandemic. Investors will benefit if these steps are taken in the final budget," he said.
The Bangladesh Merchant Bankers Association (BMBA) in a letter to the Finance Minister AHM Mustafa Kamal urged the withdrawal of the lock-in period condition for investment of money in the stock market from undisclosed sources.
The association said the proposed opportunity to invest undisclosed money into the capital market paying a 10% tax with a lock-in period of three years, was not feasible.
"If the proposed provisions are not withdrawn in the final budget, the undisclosed money will be invested in other areas," it said.
Merchant bankers also urged a reduction in corporate tax for listed firms.
They said the minimum corporate tax rate for listed companies should be reduced to 20% from the existing 25%.
It sought to reduce the corporate tax on merchant banks from 37.5% to 32.5%.
The association demanded the proposed tax at source rate of 0.05% be reduced to 0.015% on stock transactions.
In the budget proposal, the government has proposed a reduction of 2.50% corporate tax for non-listed companies.
