The proposed budget has brought no cheers for stock investors, who have been battered by a prolonged slump in indices, but promised measures to develop the country’s bond market.
Though the government wants to allow investment of black money in the stock market, investors say such a move barely yielded good return in the past.
Adding to their woes, Finance Minister AHM Mustafa Kamal proposed to reduce the corporate tax gap between listed and non-listed companies which analysts think would discourage non-listed firms to go public.
Corporate tax for non-listed companies might be brought down by 2.5 percentage points to 32.5 per cent, but the rate would remain unchanged for listed companies at 25 per cent.
Although stock market analysts, bourses and market intermediaries have long been asking for widening the tax gap to attract well-performing companies into the market, the finance minister has done just the opposite.
“The shrink in the corporate tax gap would discourage well-performing companies to get listed whereas we have long been trying to bring them in,” said Khairul Bashar Abu Taher Mohammed, chief executive officer of MTB Capital.
“The government could have reduced the rate for listed companies in the same manner.”
Md Masudur Rahman, a stock investor and a mid-level official of a corporate house, echoed the same, saying the gap reduction would obstruct the process of bringing good companies to the stock market.
“We hoped that the government would reduce the trading tax or beneficiary owner’s account fee to give small investors some respite amid the pandemic. Investors will be benefitted if the steps are taken,” said Rahman.
“From the budget we got only one thing: a right direction to develop the bond market. Other than that, there is nothing for the stock investors.”
To make the bond market attractive by abolishing the existing provision of deduction of source tax upfront on interest and discount on bonds, the finance minister proposed introducing the provision of the tax at the time of payment of interest and discount on bonds.
In addition, instead of the present provision of deducting withholding tax on the value of bond transactions, he suggested introduction of withholding tax deduction on the commission fixed by the Bangladesh Securities and Exchange Commission.
This is a positive step to make the bond market vibrant along with the proposal to allow undisclosed money in the stock market, said Mohammed.
The investment of undisclosed money may boost the cash-flow in the market. However, there is doubt whether the money would come to the market at the end, he said.
An insignificant amount of money was invested in the stock market earlier when such an opportunity was given in 2009-10, Mohammed added.
The finance minister said anyone can invest their undisclosed money in the stock market by paying a 10 per cent tax and the lock-in period will be three years.