Target stable stockmarket

Institutional investors will be exempted from paying 10 percent at-source tax on their income from the share market, in a budgetary move aimed at stabilising the capital market.

As the deduction of the at-source tax could not be implemented due to complexities, the proposal would now eliminate the difficulties and allow the institutions to pay the taxes during their submission of yearly tax return.

The tax exempt dividend income was also increased to Tk 25,000 from existing Tk 20,000 at the budget proposed yesterday. The move would encourage small investors to invest in the market.

The finance minister also proposed to discontinue the tax waiver for the companies that declares 30 percent dividend. The condition to impose 35 percent tax has also been withdrawn if the dividend is less than 10 percent.

The provision of existing 5 percent tax at source on interest income of treasury bond and treasury bill will be discontinued from the next fiscal year, in order to make the bond market vibrant.

Faruq Ahmad Siddiqi, former chairman of Bangladesh Securities and Exchange Commission, said the proposals were capital market-friendly and showed the government's willingness to stabilise as well as to improve the market.

“However, the regulator should monitor the stockmarket carefully so that no one can take the opportunity of manipulating the prices using the budgetary moves,” he said.

Referring to the stockmarket crash in 2010-11, Finance Minister AMA Muhith said: “We all the time talk about the collapse of capital market.”

The capital market now stands on strong foothold due to continuous efforts in the last four years, he said. “We would like to attract more companies to further expand the capital market.”An effective bond market can make significant contribution to macroeconomic management, the finance minister added.

Welcoming the budgetary moves, Swapan Kumar Bala, managing director of Dhaka Stock Exchange, said the proposals would create a positive impact in the stockmarket.

“A vibrant stockmarket can play a significant role in the economy, as it will not only encourage entrepreneurs to raise capital through listing, it will also attract foreign investors to invest in our market,” he said.