As the budget session of the parliament begins ahead of the national budget for the next fiscal year 2022-23, there’ll be three good news for the stock market that’ll stabilize and speed up the market.
With these, the new companies will be encouraged to come to the market, investors will be attracted to invest and the revenue of the government will also increase.
These directives are the reduction of corporate tax rates, opportunity to invest undisclosed money (black money) and special incentives for export products to meet the dollar crisis; Most of which will be available in readymade garments and pharmaceutical companies.
Former caretaker government’s financial adviser and former chairman of the Bangladesh Securities and Exchange Commission (BSEC) Professor Mirza Azizul Islam said that reduction of corporate tax is a good news.
However, more benefits should be given to the listed companies in the capital market without reducing the flow. Good companies will be interested in being listed. He added that it is not that too much money will come to the capital market after being given the opportunity to invest in black money, but it will have a positive effect on the capital market psychologically.
Also, he said giving special incentives to export companies to meet the dollar crisis on a priority basis would encourage investors to invest.
Corporate tax may be reduced by 2.5 percent in the forthcoming budget. In this case, more than 10 percent of the paid up capital of the companies has to be released in the capital market through initial public offering (IPO).
Besides, all types of transactions except cash expenditure and investment up to Tk 12 lakh per annum should be done through bank accounts.
At present, the tax rate of ordinary companies listed on the capital market is 22.5 percent, which may be reduced by 2.5 per cent to 20 percent. The tax on a company owned by one person may be reduced from 25 percent to 22.50 percent.
The tax rate of listed banks, insurance companies, mobile financial services companies and financial institutions is 37.5 percent currently. At present, the tax rate of unlisted companies is 40 percent and that of Merchant Bank is 37.5 percent.
Besides, the tax rate for cigarette and other tobacco companies is 45 percent and for mobile operators it is also 45 percent. From there it can be reduced by 2.5 percent to 42.50 percent.
Black Money Investment
The opportunity to invest black money (undisclosed money) in the capital market has been given without question till June 30 of the current fiscal year. From July 2021 to last April, only 286 people have used the investment opportunity.
The government is cancelling the amnesty facility from the new fiscal year as the investors did not invest black money as expected. However, from FY 2022-23, according to Section 19 (e) of the Income-tax Ordinance, black money can be invested in the capital market with an additional penalty of 10 percent of the prescribed tax.
In this case, the National Board of Revenue and the Anti-Corruption Commission (ACC) are instructed not to ask any questions. As a result, investors no longer have to keep investing in the capital market for at least one year. Besides, the provision of investing in mutual funds should not be obeyed mandatorily.
Finally, in the budget of FY 2022-23, Incentives of Tk 8,300 crore are being provided in the budget to expand the market for export products in order to tackle the dollar and global crisis. In other words, the allocation of Tk 465 crore is being increased in the new fiscal year.
Factories of 42 products including export oriented readymade garments, leather and pharmaceutical sectors will get this facility. The traders will be able to make up for the loss of the dollar crisis by this.