Volatile capital market hits tax collection at rock bottom 

The government's earnings from the stock market tumbled last year, hitting a five-year low as indices fell, trading slowed, and investor confidence wavered. Most of these taxes come from stock turnover, and the slowdown has taken a noticeable bite out of revenue.

According to Dhaka Stock Exchange (DSE) data, the government collected just Tk112 crore in FY25 – down a quarter from Tk153 crore the year before. To put it in perspective, this is the lowest since FY21. For context, back in FY22, the government raked in Tk286 crore despite a global market slowdown due to Covid-19, as the DSE was buzzing with activity. 

That year, total trading hit a whopping Tk3.18 lakh crore, with daily turnover averaging over Tk1,300 crore – a 29% jump from the previous year.

In FY25, the DSE saw total trading of only Tk1.25 lakh crore, with an average daily turnover of Tk522 crore – a drop of nearly 16% compared with the previous year. The benchmark DSEX index opened strongly in August, reaching 6,016 points and seeing some days with turnover above Tk2,000 crore, as investors cheered the removal of the old government. 

But the optimism didn't last long. Macroeconomic worries, weak corporate earnings, and low participation slowly dragged the market down. By late May, the index hit a low of 4,615 points before finishing the year at 4,838 – a 9% drop overall.

Activity on the market stayed sluggish, with investors hesitant to put fresh money in. The size of the market relative to the economy also shrank – the market capitalisation-to-GDP ratio fell to just 12%, showing that equities are playing a smaller role in Bangladesh's financial system. Valuations look tempting on paper, with the price-to-earnings ratio down to 8.6, but that alone hasn't been enough to lure investors back in meaningful numbers.

A managing director at a brokerage firm told The Business Standard, "The capital market is one of the government's money-making avenues. The more people trade, the more the government collects in taxes. Last year, the market barely moved, so revenue dropped."

He added that policymakers need to do more to get the market buzzing again. "After the recent government change, the market's been struggling with the economy. Once the new government takes office, focus should be kept on boosting activity. If the market picks up and businesses linked to it grow, government revenue will rise naturally," he said.