DSE welcomes budget amidst negative investor reactions

The Dhaka Stock Exchange (DSE), the premier bourse in Bangladesh, has welcomed the proposed budget for the fiscal year of 2022-23 even though general investors have reacted negatively, sending the key index lower in the last two trading sessions.

The DSEX, the benchmark index of the DSE, dropped 87 points on Sunday and yesterday. General investors see no budgetary measure exclusively for the stock market, so the index is falling.

However, the DSE hopes that the macroeconomic stability targeted in the budget would have a positive impact on the market in the long run.

What is more, the corporate tax cut of 2.5 percentage points will also have a positive impact on the profitability of listed companies and thus the stock market index.

However, both listed and non-listed companies will be eligible for the corporate tax benefit, meaning the gap in the tax paid by the two types of companies would remain the same.

Pointing this out, the DSE urged the government to raise the tax gap to at least 10 per cent so that non-listed companies are encouraged to go public.

The DSE's recommendations came at a post-budget press briefing at its Nikunja head office in Dhaka yesterday.

The corporate tax cut will not be easy to avail since one of the conditions is that all incomes have to be maintained through banking channels alongside expenditures and investments of over Tk 12 lakh, according to general investors.

Moreover, while banks, non-bank financial institutions, insurance, tobacco and telecom companies will not get the benefit, listed companies from these sectors account for more than 60 per cent of the DSE's total market capitalisation.

So, the stock market will not benefit from the corporate tax cut and that is why the market index is falling, said a number of investors yesterday.

About the situation, M Shaifur Rahman Mazumdar, chief operating officer of the DSE, said the government has targeted to ensure macroeconomic stability.

"This will give a boost to employment and the economic situation. It will be helpful for the market ultimately."

Md Eunusur Rahman, chairman of the DSE, described the proposed budget as business-friendly, saying it is targeting to raise investment and enhance development.

Md Siddiqur Rahman and Sharif Anwar Hossain, directors of the DSE, and Tarique Amin Bhuiyan, managing director of the bourse, were also present at the event.

The DSE requested for yields from all types of bonds to be exempted from tax, as it was for zero-coupon bonds, so that the bond market could turn vibrant.

It called for the amount of tax-free dividend income to be raised to Tk 1 lakh and to consider the source tax of the dividend as the final tax.

The exchange urged the government to reduce the tax rate for listed small and medium enterprises to 10 per cent for at least five years so as to make it lucrative for them to go public.

It demanded a reduction of the dividend tax rate of corporate shareholders to 10 per cent from the existing 20 per cent and considering it as final tax.

It also recommended reducing the source tax of stock brokerage firms from 0.05 per cent to 0.015 per cent.