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Bank & Finance - June 11, 2022

Black money should be allowed in stock market

Mahfuz Emran: The economists have expressed their opinion to inject black money in the capital market so that the industrialization of the country could be encouraged by creating job opportunities for the unemployed youths.
President of the Global Economist Forum and the Global Development Bank Dr Enayet Karim said that the proposal to bring back the laundered money after paying tax is unethical and illegal. It will encourage the corruption and mis-use of public fund for personal interest in future.
Three former governors of BB Dr Farashuddin Ahmed, Dr Saleh Uddin Ahmed and Dr Atiur Rahman have expressed their hard reaction over the proposal on the laundered money bring back after giving tax.
They rather suggested the government to inject the black and laundered money into the capital market for greater interest of the country.
The Chittagong Stock Exchange (CSE) has demanded that black money or undisclosed money be given a chance to invest in the stock market in the next financial year (2022-23) as in the current financial year (2021-22). The company claims that this will increase the government’s revenue including liquidity in the stock market.
The demand was made by CSE chairman Asif Ibrahim yesterday at a virtual press conference following the proposed budget.
The CSE chairman said that in the proposed budget, the facility of investing undisclosed money in the capital market has been abolished by paying 10 per cent tax to individual taxpayers. We strongly urge you to maintain this facility until next year. We hope that as the market grows stronger, the government’s revenue will increase and money laundering will decrease.
Giving the opportunity to launder black money is being called immoral by various parties. In response to a question from journalists, why are you demanding the opportunity to invest black money in the stock market, Ibrahim said, “We do not morally support the opportunity to launder black money.” We also think that honest taxpayers will be discouraged. However, in the current economic context, we are demanding the opportunity to invest black money in the stock market.
This will increase government revenue and increase liquidity in the stock market. At the same time money laundering will decrease.
The CSE chairman demanded that the tax rate gap between listed and unlisted companies be increased to 10 per cent. He said that in case of more than 10 per cent share of paid-up capital for the development of capital market and to attract investment, it has been proposed to reduce the tax rate from 22.5 per cent to 20 per cent for listed companies in the initial public offering (IPO).
However, it has been proposed to reduce the tax rate of listed companies to 10 percent or less through IPO and reduce the previous rate to 22.5 percent. On the other hand, it has been proposed to reduce the tax rate of unlisted companies from 30 percent to 26.5 percent. We applaud the announcement of tax cuts at various levels.
“However, the tax gap between listed and unlisted companies can be increased from 8.5 per cent to 10 per cent to encourage the listing of good companies in the capital market,” said Asif Ibrahim, former president of the Dhaka Chamber of Commerce and Industry.
He said at present, the tax rate gap between listed and unlisted companies is very small. So good companies are not interested in coming to this market. Because if you are listed in the capital market, you have to comply with various types of compliance. The companies have to spend extra money. As a result, no real benefit of tax rate rebate can be enjoyed.
He further said that if the tax rate gap between non-listed companies is widened by reducing the tax rates of listed companies, good companies will be interested in entering the capital market for tax relief. On the one hand, the capital market will be prosperous, on the other hand, if the transaction increases, additional tax will be collected from it. Moreover, listing on the capital market increases the transparency and accountability of companies. Having to be under the supervision of various agencies reduces the chances of tax evasion. It ensures tax collection of the government.
The CSE currently has a corporate tax rate of 30 percent. The CSE has demanded that it be fixed at zero till June 30, 2025. Arguing for this claim, the CSE chairman said that capital investment was required for the technical and infrastructural development of the stock exchange, including attracting strategic investors.
Although the knowledge and skills of investors and the financial capacity of the CSE are needed to build a stable capital market in the long run, the earnings of the exchanges have declined significantly at present.
‘Moreover, the Chittagong Stock Exchange is working tirelessly to form the first commodity exchange in Bangladesh. A lot of money has to be spent for its formation and implementation, for infrastructural development, technical assistance, legislation, training and creation of public awareness,”said Asif Ibrahim.
The CSE chairman said that in order to reach Qatar in the developed world, in order to achieve the desired target of private investment and GDP ratio, it has been proposed to reduce the corporate tax rate in the budget of the new fiscal year (2022-23). At present, the ratio of private investment to GDP in Bangladesh is 23 percent. In order to reach Qatar in the developed world, the government is taking steps to increase this ratio, which we think is a very positive initiative.
Further demands made by CSE are:
“ To reduce the existing source tax on the transactions of the members of the stock exchange by 0.015 percent.
“ Inclusion of shares of state-owned for-profit companies in the capital market by loading. There may be special tax exemptions for this.
“ The tax rate of listed SME companies should be fixed at zero percent for the first three years and 15 percent thereafter.
“ To consider the tax deducted from the income from the dividend of the listed company as the final tax.
“ To increase the tax-free cash dividend received from listed companies from Tk 50,000 to Tk 1 lakh.
“ Keep the entire cash dividend received from mutual fund or unit fund income tax free. At present, cash dividends up to Tk 25,000 received from mutual funds or unit funds are exempt from income tax.

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