Widen tax limit on stocks dividend
Investors in the stock market demanded higher tax limit on dividend from Tk 25000 exemption to taka one lakh with some other facilities in the budget to be unveiled on June 13.
They made their case to the National Board of Revenue (NBR) saying that the sluggish market has lost appeals to the investors as they continue to lose money in trading over the past year instead of earning profit.
But unmindful of investors’ plight the BNR is shelving whatever small profit they make in the highly bearish market. The budget must offer encouraging incentives to bring the market back to normal trading, they said in their budget proposals to NBR chairman.
Both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) threw their weight behind the investors by including the demand in their budget proposal submitted to the National Board of Revenue last month.
“Considering the present market scenario, they said small investors may be allowed tax exemption on dividend income up to Tk 1 lakh,” said KAM Majedur Rahman, managing director of the DSE.At present, the tax exemption limit is Tk 25,000.
The market has remained sluggish and failed to meet expectation of the investors in the last nine years, only punctuated by a significant gain a number of times, he said.
During the period, the DSEX, the benchmark index of the DSE, rose to 6,336.88 points—the highest in recent history—but is much lower than the peak in the general index in 2010.
In 2010, the general index jumped to 8,918.51 point when the daily turnover hit Tk 3,249.57 crore.
Currently, the daily turnover ranges between Tk 220 crore to Tk 500 crore, whereas the benchmark index hovers around 5,300.
Rahman said the broadening of the tax exemption will attract investors to the market that will ultimately ensure sustainable development of the capital market.
At present, the capital market is facing serious liquidity crisis. If the budget proposals are implemented, it will help ease the crunch, said the DSE in its budget proposal.
“The government can remove the tax or at least the tax-free dividend income limit should be increased,” said Abu Ahmed, a stock market analyst.
He said listed companies pay corporate tax on their profit and give dividend from the profit after tax. So, the government can ease the tax on dividend earnings, he said.
Ahmed, also a former chairman of the economics department of Dhaka University, said the government will not lose in the long run even if the tax is exempted because the measure will buoy investors’ confidence and boost turnover.
A top official of the Bangladesh Securities and Exchange Commission said it placed the dividend tax issue with the finance ministry and is hopeful of getting a good result.