Dhaka stocks slumped on Sunday as investors becoming muddled following the government’s proposal to impose 15 per cent tax on the listed companies’ reserve and stock dividend, went for selling shares.
Finance minister AHM Mustafa Kamal on June 13 placed before parliament the proposal in the budget for the next fiscal year (2019-20).
DSEX, the key index of Dhaka Stock Exchange, lost 0.79 per cent, or 43.47 points, to close at 5,430.83 points on Sunday after gaining 4.67 points in the previous session.
The market began to dip from the very beginning on the day and descended more firmly to end the session deep into the red zone as investors frowned upon the government’s taxation policy for the listed companies, market operators said.
The government has proposed 15 per cent tax on retained earnings and reserve if the figures exceed 50 per cent of the paid-up capital of a listed company.
The government has also imposed tax on the value of stock dividend at the rate of 15 per cent, which will be collected from the listed companies within sixty days of such dividend declaration.
Market operators said the tax measures gave a negative signal to the market as stakeholders, companies and investors became worried about their (measures) impact on the listed companies.
They said that how it could be an incentive for a company’s shareholders when the government would collect tax from the company multiple times to increase its revenue.
Earlier, Kamal and other government high-ups pledged that there would be some incentives for the capital market, which would go beyond the investors’ expectations.
A number of investors on Sunday joked angrily, ‘Truly, the tax measures proposed in the budget are beyond our expectations.’
Market experts said that the initiative related to tax on retained earnings and reserve was against business norms, and it would result in double taxation as the companies paid tax on their total earnings.
Share market analyst and United International University professor Mohammad Musa told New Age that the market fell as it was evident that investors rejected the tax measures for the listed companies.
In the proposed budget, for the capital market there is no incentive except raising the ceiling on tax-free dividend income, he said.
He said that the 15-per cent tax on the listed companies could not be an incentive; rather it was a punishment for the companies which were listed with the country’s capital market.
Many investors become happy when some of the listed companies declare stock dividends, he said.
The average share prices of life insurance company sector dropped by 2.56 per cent, that of telecommunication by 1.03 per cent, that of bank 0.51 per cent and that of non-bank financial institution by 0.32 per cent.
Besides, the government in the budget has proposed to borrow Tk 47,364 crore from the fragile banking sector that disheartened some investors, market operators said.
The turnover at the bourse dropped to Tk 534.31 crore on Sunday from Tk 572.50 crore in the previous session.
Out of the 351 shares and mutual funds traded, 201 declined, 98 dropped and 50 remained unchanged.
DS30, the blue-chip index of DSE, lost 0.71 per cent, or 13.64 points, to close at 1,905.09 points.
DSE Shariah index DSES dipped by 0.69 per cent, or 8.65 points, to close at 1,235.40 points.
JMI Syringe led the turnover chart with its shares worth Tk 23.24 crore changing hands on Sunday.
United Power Generation Company, Eastern Housing, BBS Cables, Dragon Sweater, Eastern Cables, Northern Insurance, Silco Pharmaceuticals and British American Company were the other turnover leaders.
Northern Insurance Company gained the most on the day with a 9.62-per cent increase in its share prices while Bay Leasing and Investment was the worst loser, shedding 9.47 per cent.
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