Tax on large capital gains from stocks

Stock investors are set to be slapped with a 3 percent tax on capital gains upwards of Tk 10 lakh in the upcoming fiscal year, as part of the government's efforts to meet the ambitious revenue target.
Furthermore, for gains above Tk 20 lakh, a 5 percent tax will be applicable, a big dent for general investors whose capital gains from the stockmarket remained tax-free to date.
The move comes in a bid to collect some revenue for the national coffers from a good number of 29.85 lakh beneficiary owner's accounts who get away without paying any tax despite earning millions.
“Our goal is not to tax small investors. We seek to impose the tax on those investors who earn high capital gains from stock investment,” said Syed Md Aminul Karim, member of tax policy wing of the National Board of Revenue.
Market analysts though were not welcoming of the move, as it is likely to have a negative impact on the short-term.
The market has been downbeat in recent weeks amid growing worries about the central bank's possible move to reduce stock exposure of banks.
DSEX, the benchmark index of Dhaka bourse, lost 166.42 points or 3.54 percent from 4,562.96 in the month to June 5. The DSEX closed 4,396.54 on Thursday, losing 4.45 points or 0.10 percent a day before.
The latest move is likely to propagate the descent, they said.
“This will surprise the market as it was not consulted with the relevant stakeholders beforehand,” said Ali imam, head of research of BRAC-EPL Ltd.
But Ahsan H Mansur, executive director of Policy Research Institute, commended the move, saying some investors gain from the market even if it is sluggish.
“So, they should pay tax. It's a positive initiative. Capital gain is part of the normal tax system in any reasonably developed economy.”
The rate will remain unchanged for companies: a flat 10 percent tax on their realised gains from stock investments.
The revenue authority also plans to impose a 15 percent tax if the shareholders fail to provide electronic taxpayer identification numbers to the respective company at the time of dividend payment.
Shareholders who provide the e-TINs will see a 10 percent tax deduction on their dividend earnings.
Until now, directors of banks, insurance, leasing companies, merchant banks, brokerage firms and companies were subjected to 5-10 percent taxes for their realised gains during the submission of tax returns.
The NBR expects to get nearly Tk 200 crore through this channel, a form of direct tax.
The tax deduction will be treated as final settlement and no additional tax will be imposed on the capital gain incomes, said taxmen.