Stock investors have urged the government to widen the tax exemption limit on dividend earnings by four times considering the sluggish market for a long time.
They say they have been losing money for the last few years because of the bearish market. What is more, their dividend income is shaved off because of taxes.
Both the Dhaka Stock Exchange (DSE) and the Chittagong Stock Exchange (CSE) threw their weight behind the investors by including the demand in their budget proposal submitted to the National Board of Revenue last month.
“Considering the present market scenario, small investors may be allowed tax exemption on dividend income up to Tk 1 lakh,” said KAM Majedur Rahman, managing director of the DSE.
At present, the tax exemption limit is Tk 25,000.
The market has remained sluggish and failed to meet expectation of the investors in the last nine years, only punctuated by a significant gain a number of times.
During the period, the DSEX, the benchmark index of the DSE, rose to 6,336.88 points—the highest in recent history—but is much lower than the peak in the general index in 2010.
In 2010, the general index jumped to 8,918.51 point when the daily turnover hit Tk 3,249.57 crore.
Currently, the daily turnover ranges between Tk 220 crore to Tk 500 crore, whereas the benchmark index hovers around 5,300.
Rahman said the broadening of the tax exemption will attract investors to the market that will ultimately ensure sustainable development of the capital market.
At present, the capital market is facing serious liquidity crisis. If the budget proposals are implemented, it will help ease the crunch, said the DSE in its budget proposal.
“The government can remove the tax or at least the tax-free dividend income limit should be increased,” said Abu Ahmed, a stock market analyst.
He said listed companies pay corporate tax on their profit and give dividend from the profit after tax. So, the government can ease the tax on dividend earnings, he said.
Ahmed, also a former chairman of the economics department of Dhaka University, said the government will not lose in the long run even if the tax is exempted because the measure will buoy investors’ confidence and boost turnover.
A top official of the Bangladesh Securities and Exchange Commission said it placed the dividend tax issue with the finance ministry and is hopeful of getting a good result.