Partial removal of floor price boosts tax receipt from DSE in Jan

Y/Y tax revenue continues to fall as big-cap stocks do not move on bourses

| Updated: February 13, 2023 09:18:11

Partial removal of floor price boosts tax receipt from DSE in Jan

The government's tax revenue from the Dhaka Stock Exchange (DSE) increased 6.21 per cent to Tk 171 million in January, compared to the month before, as turnover rose significantly following the partial withdrawal of the floor price.

The Bangladesh Securities and Exchange Commission (BSEC) lifted the price movement restriction for 169 securities in December last year.

The restriction is still in place for another 232 securities.

As the restriction eased, the market index rose 61 points in January while the average daily turnover soared 40 per cent month-on-month to Tk 5.10 billion.

"The government tax revenue is related to market turnover, so the higher turnover has resulted in an increase in the government tax revenue," said Md. Sajedul Islam, managing director of Shyamol Equity Management.

Mr Islam, also the senior vice president of the DSE Brokers Association of Bangladesh, said there had been a rise in share transactions boosting turnover as well as tax revenue.

He suggested removing floor prices altogether to reinvigorate the stock market.

Many stocks, however, experienced more than 20 per cent price correction in January as the securities regulator allowed prices to fall up to 1 per cent in a single-day after the partial removal of the floor price.

Meanwhile, tax revenue from the premier bourse dropped 34 per cent year-on-year to Tk 1,832 million in the first seven months through January of the FY23, according to the DSE data.

The market was sluggish during the period. Low share sales by sponsor-directors made things worse, dragging daily turnover down 38 per cent to Tk 8.66 billion.

The prime index of the DSE dropped 110 points in the past seven months through January of the FY23.

Floor prices restricting big-cap stocks' movements and investors' lack of confidence played a major role behind the low turnover during the period.

The market movement relied mostly on a handful of stocks as most other securities were stuck at floor prices without potential buyers since those were deemed overvalued even at that level.

Large-cap firms, such as British American Tobacco, Grameenphone, Renata, United Power, Singer Bangladesh, with excellent reputation, which had dominated the turnover chart earlier, have remained unmoved on the bourses.

Big buyers and institutional investors were upset as they could not buy-sell shares due to the price restriction.

The government earned the revenue from TREC (trading right entitlement certificate) holders at 0.05 per cent in commission and from sponsor-directors and placement holders at 5 per cent on share sales.

Of the total tax revenue in July-January of FY23, Tk 1,312 million came from TREC holders in commission, popularly known as brokerage commission, while Tk 518 million from share sales by sponsor-directors and placement holders.

The government earned Tk 2.91 billion, the highest in 11 years, in the previous fiscal year, driven by record turnovers in a few sessions.

However, the FY11 saw the historical highest tax revenue of Tk 4.47 billion paid by the DSE to the government exchequer when the market witnessed a wild trend before crashing.

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