Stocks
Stock investors may face 15% tax on capital gains exceeding Tk50 lakh
The finance ministry plans to impose a 15% capital gains tax on stock market earnings exceeding Tk50 lakh by individuals in the upcoming national budget. Currently, individual stock investors do not pay any capital gains tax.
Finance ministry officials told the news reporter that this initiative aligns with IMF recommendations aimed at enhancing revenue collection and ensuring fiscal discipline within the country’s economic framework.
In 2015, individual investors were exempted from paying tax on capital gains from stocks, mutual funds, bonds, and debentures – a provision that may be revoked by the end of this fiscal year.
Capital market stakeholders have expressed concerns regarding the potential removal of the waiver of individuals’ tax on capital gains. They highlight that individual investors outnumber institutions in the country, and their sentiment could further dampen the already bearish stock market.
Saiful Islam, president of the DSE Brokers Association, told the news reporter, “We do not want any tax burden on the capital market now, as it has been suffering for several years amid the global crisis. Any tax imposition will negatively affect the market, causing hardship for general investors.”
He also mentioned that brokerage firms have been struggling for several years due to lower market participation amid the ongoing crisis. The imposition of a capital gains tax could create further uncertainty for the capital market.
Mazeda Khatun, president of the Bangladesh Merchant Bankers Association, told the news reporter that it is not the right time to impose a capital gains tax for individual investors in the capital market, even though the government aims to enhance revenue collection.
“The capital market may react negatively to this, as the overall situation is currently very volatile,” she added.
Mohammad Ali, a chartered accountant and former vice president of the DSE Brokers Association, previously told the news reporter, “Implementing taxation on individual stock market gains this year would be detrimental to capital market development, given that investors are already experiencing losses due to the market downturn.”
He suggested that the government should allow the market to develop in line with the economy before considering taxes, citing India’s example where capital gains tax was introduced after significant market maturity and growth.
“India started taxing long-term capital gains in 2018, after 200 years of their stock market history, whereas Bangladesh has a long way to go,” Ali added.
Abu Ahmed, a stock market expert and former economics professor at Dhaka University, said stock investors have nearly forgotten about capital gains amidst the prolonged bearish trend since the 2010-11 crash.
He expressed scepticism about the government generating sufficient revenue from the proposed measure, suggesting, “Instead, the capital gains tax could significantly harm investors.”
Since last February, the market has been in a bearish run, with recent talks about implementing a 15% capital gains tax for individual investors in the upcoming budget intensifying investor panic and leading to a sell-off of their holdings throughout May.
Meanwhile, the DSE argued that any new tax would burden capital investors, especially given the market’s critical condition due to factors like the pandemic, the Russia-Ukraine war, and the global economic crisis.
Sponsors and directors of listed companies currently face a 5% tax deduction at source on capital gains from share transfers. The finance ministry is expected to increase this rate to 15% in the upcoming budget.
Reviewing the U.S. Stock Markets, the Nasdaq Composite, recorded a decent loss of 1,023 points, reaching a closing value of 16,690 points by the end of the week. Similarly, the S&P 500 index showed a positive trend, losing 240 points to settle at 5,408 points. Meanwhile, DJIA Index experienced a notable hike, adding 1,218 points during the week and concluding at 40,345 points after a week of gaining.
In contrast, Russell 3000 Index saw a loss in week performance, with a slight drop of 141 point to reach 3,077 points by the end of the week.
Moving to Russell 2000 Index, demonstrated a notable lost of 126 points, ending the week at 2,091 points.
In the Outgoing week, the European stock market displayed a mixed performance.
Here is the data on the weekly performance of the European Stock Market, The STOXX Europe 600 index, which is considered a leading benchmark for the European market and covers approximately 90 percent of the market capitalization across 17 countries, reported a loss of 18.49 points to close at 506.56.
The United Kingdom’s FTSE 100, one of the most widely followed indices in Europe, also showed a significant drop, losing 195 points or finishing the session at 8,181.
In Germany, the DAX 30 index, added by 605 points to reach 18,301, while France’s CAC 40 decreased by 278 points to stop at 7,352 at the end of the trading day.
Italy’s FTSE MIB, which covers the top 40 stocks traded on the Milan Stock Exchange, decreased by 1,081 points to 33,291. However, Spain’s IBEX 35, lost by 228 points, to close at 11,173.
A review of South Asian stock markets shows that India’s Bombay Stock Exchange (BSE) index BSE Sensex has lost 1,182 points during the week. At the end of the week, the index stood at 82,365 points. On the other hand, the Nifty-50 index of the country’s National Stock Exchange dropped by 383 points last week. At the end of the week, the index stood at 24,852 points.
Pakistan Stock Exchange Index ‘KSE 100’, added 459 points last week. After a week of losing, the index settled at 79,002 points.
On the other hand, The Sri Lankan stock market index loss, and the Colombo Stock Exchange index ‘ASPI’ decreased by 94 points in a week. After a week the index settled at 10,775 points.
Bhutan’s stock market index ‘BSI’ dropped by 9 points hence the index stood at 1,500 points throughout the whole week. Nepal’s ‘NEPSE’ lost 22 points, therefore the index stands at 2,727 points.
Hence Dhaka Stock Exchange: The benchmark index ‘DSEX’ lost by 75.77 points or 1.31 percent, in the outgoing week. At the end of the week, the index stands at 5,728 points.
