CSE calls for tax exemption for foreign investors

The Chittagong Stock Exchange yesterday urged the government to exempt overseas investors from taxes on dividend income to attract more foreign investment to the capital market.

Increasing the limit for tax-free dividend income to Tk 25,000 from Tk 20,000 a year is a good budgetary move by the government but the amount is “very small” for foreign investors, said Wali-ul-Maroof Matin, managing director of CSE, at a press meet at the port city bourse's Dhaka office.

“The foreign investors' interest in our stockmarket is gradually increasing and we need to give them some tax benefits so that they are encouraged to come and invest in our market.”

He also urged the government to provide full tax exemption for five years instead of the existing partial exemption at graduated rates, so that it can invest for its infrastructural development in the demutualisation era.

“The shareholders of the bourse did not take any dividend last year and we are reinvesting the money for our technological and infrastructural development under the demutualisation scheme.”

Before demutualisation in November 2013, the stock exchanges were non-profit cooperatives owned by the exchange members and were not subject to corporate tax.

But with demutualisation -- a move which separated the bourse management from ownership -- the bourses were converted into profit-oriented companies owned by shareholders, and 35 percent corporate taxes applied to them as non-listed companies.

Under a graduated rate, the bourses will get full tax exemption in the first year of demutualisation, 80 percent in the second year, 60 percent in the third year, 40 percent in the fourth year and 20 percent in the fifth year.

From sixth year onwards, it will have to pay full taxes.

Matin also urged the government to reduce tax at source on share transactions to 0.015 percent from the existing 0.05 percent considering the current volatile situation of the market.

Terming the proposed budget market-friendly, he said the corporate tax cut for listed companies will encourage the non-listed ones to be listed on the stockmarket.

Meanwhile, stocks fell yesterday as investors went on a selling spree to book profits from the previous couple of days' gains.

DSEX, the benchmark index of Dhaka Stock Exchange, declined 75.43 points or 1.63 percent, finishing the day at 4,542.27 points.

“The investors were mostly churning their portfolios to safeguard stock positions,” said LankaBangla Securities.

The turnover, another important indicator of the market, also fell 9.6 percent to Tk 586.05 crore on transactions of 15.01 crore shares and mutual fund units.

Chittagong stocks also fell yesterday with the bourse's benchmark index, CSCX, declining 174.36 points to 8,459.58.