Dhaka stocks gained marginally on Tuesday after a plunge in the previous two sessions as investors went for buying shares with an expectation that the government might review the tax it imposed on listed companies’ reserve in the proposed national budget for the fiscal year of 2019-20.
DSEX, the key index of Dhaka Stock Exchange, added 0.46 per cent, or 24.94 points, to close at 5,400.23 points on Tuesday after losing 96.52 points in the previous two sessions.
The market was mostly positive throughout the session as a section of investors went for buying shares with an expectation that the proposed tax on the listed companies’ retained earnings and reserve would be reviewed, market operators said.
They said that the investors’ tension eased after National Board of Revenue chairman Mosharraf Hossain Bhuiyan again on Monday said that the tax on listed companies’ reserve would be reviewed.
Finance minister AHM Mustafa Kamal on June 13 in the proposed budget included a proposal to slap 15 per cent tax on retained earnings and reserve of a listed company if the figures exceed 50 per cent of the paid-up capital of the company.
He also proposed imposition of 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.
Mosharraf at a roundtable discussion on ‘tax, tariff and trade policies for inclusive economic growth’ on Monday said that the proposed taxes on stock dividend and reserve would be reconsidered.
The Institute of Cost and Management Accountant Bangladesh organised the meeting at its office premises in Dhaka.
The NBR chairman said that it proposed the tax to uphold the interest of the general investors as there were companies who did not want to provide cash dividends despite making huge profits and having huge reserve.
Mosharraf assured that he would discuss the issue with the finance minister. He would also request the minister to remove the two provisions if they really become harmful to the capital market.
On Sunday, the NBR chairman also said that the revenue board would review the tax on reserve and retained earnings of listed companies proposed in the budget.
Besides, market regulator Bangladesh Securities and Exchange Commission chairman M Khairul Hossain at a meeting with stakeholders on Monday said that he would discuss the tax issue with the NBR chairman and the finance minister.
The market had gained continuously before the budget as investors expected that there would some incentives for the capital market as the finance minister pledged earlier.
The market plunged in the previous two sessions after the budget as investors found no incentive, except a moderate rise in limit on tax-free dividend income, in the budget, said market operators.
Different trade bodies, companies and market experts criticised the government’s move saying that it would hinder company’s expansion, business strategy and capital base.
Market operators said investors were dismayed by the proposed taxation on the listed companies which the government officials were trying to term as incentives.
The media reported that the NBR would bag Tk 11,000 crore in additional taxes from the reserves of the listed companies if the budget proposal was approved.
The companies would require paying taxes on their reserves year after year until their reserves drop to half of their paid-up capitals.
Out of the 351 shares and mutual funds traded on Tuesday, 105 declined, 196 dropped and 48 remained unchanged.
The average share prices of textile, telecommunication and pharmaceutical sectors advanced by 2.19 per cent, 1.42 per cent and 0.55 per cent respectively.
The turnover at the bourse dropped to Tk 528.82 crore on Tuesday from Tk 534.47 crore in the previous session.
The average share prices of miscellaneous, non-bank financial institutions and bank dropped by 0.54 per cent, 0.45 per cent and 0.01 per cent respectively.
DS30, the blue-chip index of DSE, also gained 0.30 per cent, or 5.71 points, to close at 1,895.10 points.
DSE Shariah index DSES advanced by 0.67 per cent, or 8.29 points, to close at 1,232.28 points.
Eastern Insurance led the turnover chart with its shares worth Tk 18.32 crore changing hands.
Nurani Dyeing, JMI Syringe, Dragon Sweater, Global Insurance, New Line Clothings, SK Trims, Eastland Insurance Company, National Life Insurance Company and Pacific Denims were the other turnover leaders.
Eastern Insurance Company gained the most on the day with a 9.81-per cent increase in its share prices while Pragati Insurance was the worst loser, shedding 5.82 per cent.
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