Investment of ‘undisclosed’ money in stocks allowed

FE Report (June 29, 2011)

The government has decided to allow investment of undisclosed money in the stock market. It has also revised downward the proposed tax at source on exports.

Finance Minister AMA Muhith made necessary changes in the Finance Bill-2011 that was adopted by the parliament Tuesday in compliance with requests from Prime Minister Sheikh Hasina to this effect.

Anyone will be now free to invest his or her undisclosed fund in stock market by paying 10 per cent tax. But investment of declared income in the initial public offerings (IPOs) will enjoy 10 per cent tax rebate.

The government reduced the proposed tax at source to 0.70 per cent and 0.60 per cent for all exports and readymade garment exports respectively. The government had originally proposed to raise the tax to 1.50 per cent for all exports.

Tax on realtors for commercial space has been reduced to Tk 8,000, Tk 6,000 and Tk 2,000 from Tk 20,000, Tk 15,000 and Tk 5,000 respectively, depending on locations.

The government has also waived the proposed 5.0 per cent tax on poultry, fisheries and other sector. The sector will enjoy tax holiday facilities until 2013.

Muhith said, "Given the volatility of the stock market, it needed more incentives from the government."

Import of poultry feed, liquefied petroleum gas (LPG) will also enjoy special tax benefit in 2011-12.

The government also made some important changes in the proposed budget that was placed before parliament on June 9 last.

In 2007-08, the government collected Tk 8.03 billion tax against Tk 88.95 billion undisclosed income declared by 16,664 taxpayers.

In 2008-09, some 14,254 taxpayer declared Tk 7.87 billion undeclared money and paid Tk 1.08 billion tax.

Some 1923 taxpayer availed themselves of the facility in 2009-10 paying Tk 1.21 billion tax against legalizing Tk 9.22 billion undeclared income.

Economists and experts have found the existence of a large shadow economy in the country in recent times. However, a section of economists, business leaders and bourses have been suggesting the government for the last few days to allow investment of undisclosed income in share market to make the market vibrant again.

Bangladesh Economists Association and apex chamber body Federation of Bangladesh Chambers of Commerce and Industry (FBCCI) have also urged the Prime Minister to offer the opportunity.

Last year, the government offered the opportunity to formalise undeclared income thorough investment in Bangladesh infrastructure Investment bond until 2012.

However, the provision of declaring undisclosed income in Treasury Bond with 10 per cent tax was proposed on June 9 last will remain unchanged.