The government on budget proposal in fiscal year 2019-20 has announced many steps forward to effectively stabilise the capital market in the greater interest of general investors. In the budget speech, Finance Minister AHM Mustafa Kamal said that a strong capital market is required for any strong economy.
“If an economy is strong, it means that its capital market is also strong. As we want a strong economy, we would like to see the existence of a strong, vibrant and well-functioning capital market.” “Capital market is the ideal platform to collect fund for long term industrial investment,” he said adding that, “There is a trend in Bangladesh to provide long term bank loans from short term deposits, which is not evident in other countries. It creates mismatch.”
He informed the banks and loan recipients become the losers eventually. The finance minister said the government would take effective measures to encourage investors to collect long term fund from the capital market. Under the supervision of Bangladesh Bank, an amount of Tk. 856 crore has already been released under the incentive scheme, which shall be reused on a revolving basis for the protection of small investors’ interest, he mentioned.
Kamal said training would be provided to potential investors for clear understanding on share market before their investment in the market.
He said vigilance has been strengthened to ensure compliance of the capital market. The finance minister informed the government shall offer numerous incentives for the capital market in coming years.
Dividend income from the listed companies shall be tax-free up to Tk. 50,000, he said adding that, double taxation on dividend from listed companies will also be removed. Special incentives will continue for encouraging investment in the capital market, he said. In order to encourage the distribution of cash dividend, Finance Minister propose imposition of 15 percent tax on stock dividend distributed to the shareholders by any listed company, he added.
On the other hand, he proposed imposition of 15 percent additional tax on so much of retained the net profit for encouraging companies to distribute more dividend to the investors. “A provision was made in the income tax ordinance last year to avoid the multilayer taxation on dividend income. However, the application of the provision was limited only to the resident companies,” he said.
To promote foreign investment, he propose to extend the application of this provision to the non-resident companies as well. “If a financially solvent company wants to merge with the financially sick company, we will create the scope for that,” he mentioned. “We believe that if this can be done even allowing for investment allowance, if needed, through negotiation, it will lead to a strong capital market,” he said adding that, “Through the process, the depth and stability of the capital market will be enhanced.
However, an uneasy calm is prevailing in the market with a regular slump in share prices, creating panic among the investors over the several months. Over the last several months, share prices are continuously falling to a gradual demoralisation of investors, marking an ominous signal to a bearish market.
