Budget should incentivise capital market listing and investing

The capital market is going through a tough time, and the crisis has deepened as investors read news about several discouraging factors that might come in the upcoming national budget, potentially hurting the market further.

For instance, when the difference in corporate tax between listed and non-listed companies should be widened to encourage the stock market listing of thriving companies, we are reading news articles about a potential narrowing down of the existing 750 basis points gap.

The listing of good companies is a crying need for the stock market, and by going public, Bangladeshi companies will be more transparent in business, thereby boosting government revenue. We want the government to incentivise listing instead of discouraging it.

At-source taxes on trading turnover and dividends should be reduced to encourage investors. In India, the government collects a 0.002% tax on trading turnover, while it has been raised to 0.005% in Bangladesh. It should be reduced to boost turnover in the bourses.

We agree that the government needs to raise tax revenue. But it should be collected in a way that does not hurt an already struggling sector.

Capital gains from listed securities are tax-exempt for individuals, and this exemption should not be removed at this stage of capital market development. Bangladesh's stock market lags significantly behind those of our competitor economies, and we should work rigorously to let our market catch up to our peers in the coming days.

Unaccounted or untaxed money is a reality of our economy that should not exist. However, if the upcoming budget allows undisclosed money to be invested in any sector, it should also be allowed to be invested in the capital market.

The capital market has much potential to serve the economy. If it flourishes, it has the potential to contribute manifold to the national exchequer.

Alongside maintaining current encouragements, we also expect that the upcoming budget will specifically address the capital market and energise investors. 

For instance, Prime Minister Sheikh Hasina recently ordered the public listing of profitable state-owned companies. We hope the budget documents will include a roadmap for how many and which government companies will go public within a specific timeline so that investors can prepare accordingly.

Capital market product diversification efforts also need some fiscal incentives to popularise new instruments.

Saiful Islam is the president of DSE Brokers Association of Bangladesh and director of BRAC EPL Stock Brokerage Limited.