A good many investors in the country's capital market are looking for some opportunities through fiscal measures in the upcoming national budget for legalising their undisclosed money, according to some quarters in the stock market.
Sources in the capital market said many institutional and big individual investors are waiting for announcement of the budget to make their next decisions relating to investment in the stock market.
Both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) have earlier urged the authorities concerned to allow investment of undisclosed money -- after making payment of a certain portion of such money as tax -- in the stock market, without any further question being asked by the tax personnel.
"A large section of the institutional investors are not going for investment right now but waiting to see whether the government extends the opportunity for legalisation of undisclosed income," said Chief Executive Officer (CEO) of NCCB Securities and Financial Services, Mr Manjum Ali.
"Due to some obligations, merchant banks and brokerage houses cannot extend margin loan facilities to their clients. This is largely responsible for a severe liquidity problem in the market. If the opportunity to legalise undisclosed money is given, it will help boost up investors' confidence and improve the liquidity situation in the market," he observed.
The circular by the Bangladesh Bank (BB) relating to single borrower exposure limit of the subsidiaries of commercial banks - brokerages and merchant banks - has made it difficult to provide margin loan facilities to their clients, the sources in the capital market noted.
According to them, such subsidiaries of commercial banks are now under a tremendous pressure to minimise their previous loan, in line with the BB directive. This, they observed, has created some liquidity shortage in the capital market.
CEO of MTB Securities, Mr Nazrul Islam Mazumder told the FE that the capital market "is facing a lot of problems which have made investors' confidence very much fragile in recent days."
"As the market is passing through a crunch period, we will expect that the government will give the opportunity for the investors in the stock market to legalise their undisclosed money," he added.
"Any positive announcement in the budget related to the market will certainly boost up investors' confidence. The investors are waiting for what type of decision comes up in the next budget," he stated.
But there are also some strong critics of any move through fiscal measures to facilitate 'legalisation' of undisclosed money for investments in the stock market.
One such critic, who preferred anonymity, said such fiscal moves in the recent past did not give the expected result.
Any provision for declaration of 'undisclosed money' is a basic distortion of the income tax law that will discriminate the genuine tax-payers and will only encourage the culture of tax evasion or avoidance, another critic said, on the same condition.
Some critics alleged that a good number of investors in the stock market 'do not even show their such investment' in their wealth statement while submitting their annual income tax returns.
"This practice is illegal and the provision of any facility for disclosure of undisclosed money in the stock market will under such circumstances yield no positive outcome," he mentioned.
Yet another critic maintained that there would always be scope for foul-play in the stock market if it is considered as a 'tax heaven'.
"Proper enforcement of tax laws, as far as investments in the capital market are concerned, may be considered by some quarters as an additional botheration and also somewhat burdensome for some investors. But this is critically important for transparency and accountability which will limit the scope for manipulation by influential and powerful vested interests", he maintained.
Meanwhile, market expert Salahuddin Ahmed Khan told the FE that the government can consider allowing undisclosed money to be legalised only through the Bangladesh Fund.
Investment Corporation of Bangladesh (ICB), the main sponsor of the Tk 50 billion Bangladesh Fund, has sought opportunity to legalise undisclosed money in case of investment in the fund, which was created to provide support for the share market under its present stressed conditions.
"It will not be wise to give the opportunity to legalise undisclosed money at a subsidised rate in general", said Salahuddin, who is also a former CEO of the DSE.
Sources in the capital market said many institutional and big individual investors are waiting for announcement of the budget to make their next decisions relating to investment in the stock market.
Both Dhaka Stock Exchange (DSE) and Chittagong Stock Exchange (CSE) have earlier urged the authorities concerned to allow investment of undisclosed money -- after making payment of a certain portion of such money as tax -- in the stock market, without any further question being asked by the tax personnel.
"A large section of the institutional investors are not going for investment right now but waiting to see whether the government extends the opportunity for legalisation of undisclosed income," said Chief Executive Officer (CEO) of NCCB Securities and Financial Services, Mr Manjum Ali.
"Due to some obligations, merchant banks and brokerage houses cannot extend margin loan facilities to their clients. This is largely responsible for a severe liquidity problem in the market. If the opportunity to legalise undisclosed money is given, it will help boost up investors' confidence and improve the liquidity situation in the market," he observed.
The circular by the Bangladesh Bank (BB) relating to single borrower exposure limit of the subsidiaries of commercial banks - brokerages and merchant banks - has made it difficult to provide margin loan facilities to their clients, the sources in the capital market noted.
According to them, such subsidiaries of commercial banks are now under a tremendous pressure to minimise their previous loan, in line with the BB directive. This, they observed, has created some liquidity shortage in the capital market.
CEO of MTB Securities, Mr Nazrul Islam Mazumder told the FE that the capital market "is facing a lot of problems which have made investors' confidence very much fragile in recent days."
"As the market is passing through a crunch period, we will expect that the government will give the opportunity for the investors in the stock market to legalise their undisclosed money," he added.
"Any positive announcement in the budget related to the market will certainly boost up investors' confidence. The investors are waiting for what type of decision comes up in the next budget," he stated.
But there are also some strong critics of any move through fiscal measures to facilitate 'legalisation' of undisclosed money for investments in the stock market.
One such critic, who preferred anonymity, said such fiscal moves in the recent past did not give the expected result.
Any provision for declaration of 'undisclosed money' is a basic distortion of the income tax law that will discriminate the genuine tax-payers and will only encourage the culture of tax evasion or avoidance, another critic said, on the same condition.
Some critics alleged that a good number of investors in the stock market 'do not even show their such investment' in their wealth statement while submitting their annual income tax returns.
"This practice is illegal and the provision of any facility for disclosure of undisclosed money in the stock market will under such circumstances yield no positive outcome," he mentioned.
Yet another critic maintained that there would always be scope for foul-play in the stock market if it is considered as a 'tax heaven'.
"Proper enforcement of tax laws, as far as investments in the capital market are concerned, may be considered by some quarters as an additional botheration and also somewhat burdensome for some investors. But this is critically important for transparency and accountability which will limit the scope for manipulation by influential and powerful vested interests", he maintained.
Meanwhile, market expert Salahuddin Ahmed Khan told the FE that the government can consider allowing undisclosed money to be legalised only through the Bangladesh Fund.
Investment Corporation of Bangladesh (ICB), the main sponsor of the Tk 50 billion Bangladesh Fund, has sought opportunity to legalise undisclosed money in case of investment in the fund, which was created to provide support for the share market under its present stressed conditions.
"It will not be wise to give the opportunity to legalise undisclosed money at a subsidised rate in general", said Salahuddin, who is also a former CEO of the DSE.
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