The bullish capital market helped the government to collect higher revenue from the Dhaka Stock Exchange (DSE) as month-on-month tax collection soared 74 per cent in August riding on higher trading activities.
Market analysts said on the back of the rising trading volume, the government earnings from the prime bourse rose accordingly, as earning is related to turnover.
The market turnover rose significantly in recent months as the buoyant investors have given a boost to the capital market amid increased confidence in the market, said a merchant banker.
The government bagged revenue worth Tk 502 million in August which was Tk 289 million a month earlier in July, 2021, registering an increase of 74 per cent, according to statistics with the DSE.
Of the total earnings in August, Tk 451 million came from the TREC holders' commission, popularly known as brokerage commission, while Tk 51 million came from the share sales by sponsor-directors and placement holders, the DSE data showed.
In July, Tk 233 million came from the TREC holders' commission and Tk 56 million came from the share sales by sponsor-directors and placement holders.
The government earned the amount on TREC (trading right entitlement certificate) holders' commission and share sales by sponsor-directors and placement holders.
The DSE, on behalf of the government, collects tax as TREC holders' commission and share sales by sponsor-directors and placement holders at the rate of 0.05 per cent and 5.0 per cent respectively and deposits the amount to the government exchequer.
The government earnings from the DSE also rose 82 per cent year-on-year in the first two months -July and August -- the current Fiscal Year (FY) 2021-22 compared to the same period of the previous fiscal year.
The government earned revenue worth Tk 791 million in the first two months of the current fiscal year as against Tk 434 million in the same period last fiscal year.
The government earnings from the prime bourse rose as trading activities increased substantially in August, the second month of the current fiscal year, said a DSE official.
"The earnings are related to turnover. It's usual that tax will rise if turnover increases," he said. He noted that as the turnover marked an increase in August compared to July, so did the tax.
The daily turnover, the important gauge, jumped to Tk 25.06 billion on average in August, soaring 61 per cent over previous month's average of Tk 15.53 billion in July 2021, as investors put fresh funds on stocks amid increased confidence in the market.
DSEX, the prime index of the DSE, also posted 444 points or 6.91 per cent gain in August 2021.
The government's revenue earnings from the DSE registered a 10-year high to Tk 2.66 billion in the FY 2020-21 as the DSE turnover recorded a decade high in few sessions in the last fiscal year.
The country's capital market also posted the highest return of 54 per cent in a decade in the FY 2020-21 despite ongoing pandemic.
However, in the FY 2019-20, the government's earnings from the DSE plunged more than 10 years low to Tk 1.04 billion due to sluggish market turnover coupled with trading suspension for more than two months due to the Covid-19 outbreak.
The DSE paid tax worth Tk 2.72 billion in FY2011-12, Tk 1.27 billion in FY2012-13, Tk 1.54 billion in FY2013-14, Tk 1.74 billion in FY2014-15, Tk 1.58 billion in FY2015-16, Tk 2.46 billion in FY2016-17, Tk 2.33 billion in FY2017-18 and Tk 2.51 billion in FY2018-2019 on TREC holders' commission and share sales by sponsor-directors and placement holders.
However, the DSE paid tax worth Tk 4.47 billion in the FY2010-11, the highest in its history, when the market witnessed a wild trend before crashing.