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Budget 2024-25: Corporate Tax Slashed to 25% for Non-Listed Firms

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Corporate Tax

In the proposed budget for the fiscal year 2024-25, Finance Minister Abul Hasan Mahmood Ali announced a reduction in the corporate tax rate for non-listed companies by 2.5%. This move aims to stimulate growth and compliance among privately-held firms by lowering their tax burden to 25%.

The announcement was made on Thursday, June 6, during the budget presentation in the National Parliament, chaired by Speaker Shirin Sharmin Chaudhury and attended by Prime Minister Sheikh Hasina. Prior to the presentation, the proposed budget received cabinet approval and was signed by President Md. Sahabuddin.

Key Provisions on Corporate Tax
Reduction in Corporate Tax Rate: For companies not listed on the stock exchange, the corporate tax rate will be reduced from 27.5% to 25%. However, this reduction is conditional on specific financial practices.

Conditions for Reduced Rate: To qualify for the reduced tax rate, companies must ensure that any single transaction exceeding Tk 5 lakh and all annual expenses or investments exceeding Tk 36 lakh are conducted through banking channels. This measure is intended to promote transparency and discourage unreported cash transactions.

Tax Rates for IPOs: Companies that list on the stock market and offer more than 10% of their shares through Initial Public Offerings (IPOs) currently enjoy a corporate tax rate of 20%. If they offer less than 10% of their shares, the rate is 22.5%. The proposed budget increases these rates by 2.5% each, to 22.5% and 25%, respectively. However, companies that meet banking transaction requirements will also receive a 2.5% tax reduction.

Penalty for Non-Compliance: Companies failing to comply with the banking transaction requirement will continue to face a higher tax rate. Non-listed companies that do not meet the transaction criteria will

Budget 2024-25: 2.5% Reduction in Corporate Tax for Non-Listed Companies
In the new budget for the fiscal year 2024-25, Finance Minister Abul Hasan Mahmood Ali has proposed a 2.5% reduction in the corporate tax rate for non-listed companies. This change lowers the rate from 27.5% to 25% for privately-held firms, aiming to alleviate tax burdens and encourage better financial practices.

The announcement was made during the budget presentation on Thursday, June 6, in the National Parliament, chaired by Speaker Shirin Sharmin Chaudhury, with Prime Minister Sheikh Hasina in attendance. The proposed budget had earlier received cabinet approval and was signed by President Md. Sahabuddin.

Detailed Breakdown of Corporate Tax Adjustments
Lowered Corporate Tax Rate: The corporate tax for non-listed companies will be reduced to 25%, down from the current 27.5%. This reduction aims to make private businesses more competitive and compliant.

Conditions for Reduced Tax: To benefit from the reduced tax rate, companies must ensure that any single transaction over Tk 5 lakh and all annual expenditures or investments exceeding Tk 36 lakh are processed through banking channels. This condition is set to increase financial transparency and accountability.

Tax Rates for IPOs: For companies listed through Initial Public Offerings (IPOs), the corporate tax rate will be adjusted based on their share offerings. Companies offering more than 10% of their shares will face a tax increase from 20% to 22.5%. Those offering less than 10% will see an increase from 22.5% to 25%. These companies can also receive a 2.5% tax reduction if they comply with the banking transaction requirement.

Penalties for Non-Compliance: Companies failing to adhere to the banking transaction stipulations will not benefit from the reduced tax rates. Non-listed companies that do not meet these requirements will continue to be taxed at the higher rate of 27.5%.

This proposed adjustment in corporate tax aims to streamline tax obligations, encourage the use of formal banking channels for large transactions, and ensure greater financial transparency within the corporate sector.

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Market Woes Drive Investors Away as Dhaka Bourse Sees Significant Decline

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By June 20 this year, approximately 102,000 beneficiary owners’ (BO) accounts were emptied, and market capitalization plummeted by Tk 1.37 lakh crore due to prolonged poor returns, frustrating investors and prompting them to exit the market.

Data from the Central Depository Bangladesh Limited (CDBL) reveals that in the six months leading up to June 20, the total number of BO accounts with zero share balance surged by 34% to 398,000, while BO accounts with share balances fell by 91,651 to 1.312 million.

During this period, the benchmark index DSEX of the Dhaka Stock Exchange (DSE) dropped over 1,000 points, closing at 5,244, while the blue-chip index DS30 fell by 218 points, settling at 1,875. The market capitalization at DSE also declined by over 17%, ending at Tk 6.43 lakh crore on June 20.

Rising interest rates, taxes on individual investors’ capital gains from listed securities, and a severe confidence crisis due to regulatory interventions are collectively impacting stock market performance, according to stockbrokers and market experts.

The capital market has been grappling with economic uncertainty, exacerbated by the Russia-Ukraine war. In response to the crisis, the Bangladesh Securities and Exchange Commission (BSEC) imposed a floor price in 2022 to prevent a freefall in share prices. Despite lifting the restriction after more than two years, the bearish trend persisted. Consequently, BSEC reintroduced protective measures, including reducing the circuit breaker limit from 10% to 3%.

Abu Ahmed, former economics professor at the University of Dhaka, explained that unprecedentedly high interest rates, especially on treasury bonds, have driven large investors to shift their funds from the stock market to bonds. “With treasury bond rates steady at around 12%, it’s a risk-free, preferred choice for many investors,” he said. This shift has resulted in a fund crisis in the market, he added.

Ahmed also highlighted a decline in the number of reputable companies entering the market and underperformance in key sectors like banks, insurance, non-bank financial institutions, and manufacturing companies. He pointed out that a lack of good governance and long-term policy support has eroded investor confidence. Additionally, the government is withdrawing previously granted investment benefits.

Md Saiful Islam, president of the DSE Brokers Association of Bangladesh (DBA), stated in a June 11 press conference that factors such as the absence of high-quality initial public offerings (IPOs), governance issues among stakeholders, and the proposed capital gains tax are diminishing investor confidence. He urged the government to withdraw the capital gains tax, asserting that it exacerbates an already bleak market.

Finance Minister AH Mahmood Ali proposed a 15% tax on individual investors’ capital gains exceeding Tk 50 lakh from listed securities in the upcoming fiscal year budget, amid a market downturn. However, Abu Hena Md Rahmatul Muneem, chairman of the National Board of Revenue, argued in a post-budget press conference that taxation was not the root cause of the market’s issues, citing that long-standing tax incentives had not spurred market growth.

Despite these challenges, the benchmark index of the DSE has risen over the last four trading sessions, recovering 174 points to close at 5,244 last Thursday. Stockbrokers attribute this uptick to investor optimism about a potential rationalization of the capital gains tax proposal and a concessional salvage fund for the state-owned Investment Corporation of Bangladesh (ICB).

EBL Securities noted in their daily market commentary that rumors about the possible withdrawal of the proposed capital gains tax have instilled some confidence among cautious investors.

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Dhaka Bourse Skyrockets, Achieving 4-Day Gaining Streak

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Dhaka Stock Exchange DSE, Bourse on the last working day of the week, 20th June, ended with a hike in Indices and Turnover from the previous working session. This information is known from DSE sources.

452 crore 94 lakh taka shares were traded on this day. 206 crore 50 lakh more tradings were done in DSE today compared to the previous workday, June 19th, Shares worth Tk 246 crores 44 lakh shares were traded last time, Wednesday

The benchmark DSEX increased 82.74 points or 5,244 The Shariah-based index DSES added 24.78 points or 1,146, and the blue-chip index DS30 gained by 31.34 points or 1,875.

Of the issues traded, 288 advanced, 55 declined and 50 remained unchanged.

Linde Bangladesh Limited ranked top gainer on DSE, the share price increased by Tk 424.10 paisa or 43.04 percent. On this day, the share was last traded at Tk 1409.40 paisa.

Global Heavy Chemicals Limited ranked top loser on the DSE, the share price dropped by Tk 1.20 paisa or 3.00 percent. On this day, the share was last traded at Tk 38.90 paisa.

DSE topped on trade is Asiatic Laboratories Limited 14 crore 63 lakh takas of company shares have been traded.

A total of 45 companies’ shares were traded in the Block on Dhaka Stock Exchange. A total of 1 crore 71 lakh 39 thousand 978 shares of the companies were traded. The financial value of which is 113 crore 38 lakh taka.

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National Tea Sets New Subscription Date for Tk279.7cr Placement Shares

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National Tea Company Limited, a publicly traded entity, has announced new subscription dates for its Tk279.7 crore placement shares. Originally slated for nearly a year ago, the subscription had been postponed by regulatory authorities but is now set to proceed following a recent court directive.

According to the company’s disclosure, the subscription period will run from June 19 to August 19 during banking hours. This follows a letter from the Bangladesh Securities and Exchange Commission (BSEC) instructing the resumption of the capital-raising initiative, in compliance with a High Court order.

The primary objective of issuing these placement shares is to fuel business growth, finance working capital, and repay bank loans. However, due to a funding shortfall, the company has been unable to complete its modernization projects and other initiatives, resulting in decreased turnover caused by declining average sale prices in the auction market for its products.

Following the court’s directive, significant progress has been made in implementing the state-owned company’s plans.

In July of the previous year, Jakir Hossain Sarkar, a minor shareholder with just 10 National Tea shares, filed a writ petition with the High Court opposing the company’s scheme to issue fresh shares as approved by the BSEC, alleging unequal treatment of existing shareholders. The court later upheld the BSEC’s approval. Upon a petition by the market regulator, the Appellate Division’s chamber judge temporarily stayed the High Court’s order.

Shareholders have borne the brunt of these legal battles. After the record date, the price of National Tea shares dropped in anticipation of the increased number of shares, and the issuance of placement shares remained uncertain.

In April last year, National Tea received BSEC approval to raise its paid-up capital by issuing 2.34 crore shares at Tk119.53 each, inclusive of a Tk109.53 premium per share. The distribution plan allocated 1.24 crore shares to the government, Investment Corporation of Bangladesh, and Sadharan Bima Corporation at an average ratio of 4.43 new shares for each existing share. Sponsor-directors were allocated 13.8 lakh shares at a ratio of 3.21:1, and general shareholders were to receive nearly 96 lakh shares at a 2.85:1 ratio.

As of Wednesday, National Tea shares closed at Tk388.60 each on the Dhaka Stock Exchange. Founded in 1978 and listed on the capital market in 1979, National Tea cultivates, manufactures, and sells tea and rubber in the local market. The company’s average annual production is about 52 lakh kg of tea, most of which is sold through the Chattogram auction market.

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