ICB-run MF’s trading on despite tenure expiry

The trading of the units of the Investment Corporation of Bangladesh-run First ICB Mutual Fund continued at the Dhaka and Chittagong stock exchanges illegally on Wednesday despite that fact that the tenure of the fund expired on March 31.

As per the mutual fund rules, the stock exchanges delist a MF after the end of its tenure.

A senior official of Dhaka Stock Exchange told New Age on Wednesday that the trading of the units of First ICB Mutual Fund continued at the bourse despite expiry of its tenure on a verbal instruction from the capital market regulator.

He said that senior officials of the Bangladesh Securities and Exchange Commission also told them that the tenure of the fund would be extended by three months with effect from April 1 within this week.

The regulator, however, is yet to issue any directive in this regard.

A BSEC senior official on Wednesday told New Age that the commission on Tuesday held a meeting in this regard and found no valid ground to approve ten-year tenure extension plea made by the ICB for eight mutual funds it runs.

He said the commission would extend the tenure of First ICB Mutual Fund by three months from April 1.

As per the mutual fund rules, the tenure of close-ended mutual funds should not exceed 10 years.

Despite the legal bar, the units of the eight ICB-run mutual funds have been trading at the DSE for 18-34 years.

The BSEC in November last year, scrapping an ICB plea for ten-year time extension for the eight mutual funds, asked the state-owned entity to convert or windup the close-ended MFs within December 2016 one by one starting from First ICB Mutual Fund, enlisted with the stock exchange in 1980, within March.

The commission at the same time also warned the ICB for not complying with earlier regulatory directive that had asked the entity to convert or windup all eight ICB-run mutual funds within December 2014.

Another BSEC official told New Age that despite ICB’s repeated violation of securities rules in this regard, the commission refrained from taking any tough measure against the entity due to the ICB’s strong lobby with the government’s influential quarter.

The ICB, ignoring the BSEC directive issued in November, lobbied the finance ministry to press the BSEC for extension of the MFs’ tenures, BSEC officials said.

Following pressure from the finance ministry and some other influential quarters, the capital market regulator agreed to consider the ICB’s proposal for tenure extension within legal framework, they said.

After getting BSEC’s green signal, the ICB as per its board decision on January 22 sought another ten-year tenure for its eight MFs by handing over the management of the funds to ICB Asset Management Company, they said.

As the commission found the proposal unlawful, the ICB filed another proposal to the commission last month.

The proposal said that as per the legal framework, other firms would be the trustee and custodian of the funds while the ICB would be the sponsor of the funds and would hold 10 per cent stake in each fund.

Even after the formulation of the mutual fund rules in 2001 that separated functions of sponsor, asset manager, trustee and custodian, the ICB has been doing all of these jobs violating securities rules.

The BSEC earlier rejected AIMS of Bangladesh’s plea for extension of tenure of its two mutual funds by 10 years. (Source: New Age, April 2, 2015)

Bangladesh: Tax-free limit of stock capital gain to be raised to Tk 20 lakh

Dhaka, June 27 (New Age): The government is likely to increase the limit of tax-free capital gains from stock investment for individual investors to Tk 20 lakh from the proposed Tk 10 lakh amid protest from the investors, officials of the National Board of Revenue said.

The government may also reduce the proposed tax on realised capital gains and increase the slabs of gains bowing down the tremendous pressure from the stock market players, they said.

In the last moment, the revenue officials on Thursday prepared an amendment proposal of the Finance Bill-2014 following the instruction from the finance minister Abul Maal Abdul Muhith.

According to the proposal, individual investors will have to pay tax at the rate of 2 per cent on capital gains from Tk 20 lakh to Tk 50 lakh in the coming fiscal year of 2014-15.

Tax will be imposed at the rate of 3 per cent on capital gains above Tk 50 lakh, officials said.

Earlier on June 5, Muhith proposed in the finance bill to impose tax on capital gains for the first time in the country.

The proposed tax rate was 3 per cent on capital gains above Tk 10 lakh but less than 20 lakh, 5 per cent for above Tk 20 lakh.

Tax-free limit of capital gains was proposed at Tk 10 lakh.

Earlier this week, finance minister in a meeting with the NBR officials organised for finanlising amendment of the finance bill categorically instructed for not to change the proposed tax rate and tax-free limit.

By this time, Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange and Chittagong Stock Exchange mounted pressure on the NBR and lobbied with the government high-ups to withdraw the proposed tax.

The country’s two bourses also reacted sharply to the ups and downs in the capital market.

Experts also criticised the decision saying that though the imposition of tax on higher capital gain was right but it was not the right time to do so and the decision would put a negative impact on the already volatile market.

Muhith, returning from Jeddah on Thursday morning, asked the revenue officials for changing the tax rate and tax-free threshold, officials said.

By the evening, the amendment was sent to the law ministry for vetting, they said.

The proposed amendment is final and it will not be changed unless the prime minister instructs otherwise, officials said.

The NBR also finalised an upward revision of the proposed tax exemption limit on dividend income increasing the amount to Tk 20,000 from the proposed Tk 15,000.

Currently, stock investors enjoy tax exemption on dividend up to Tk 10,000.

NBR officials said that the government imposed tax on realised gains to boost revenue collection from the sector.

The initiative was just and fair taking the amount of realised gains into consideration.

‘An investor who has high capital gains from the capital market should pay tax and the proposed slab at Tk 10 lakh capital gains in a year for imposing tax was reasonable,’ an official said.

Small investors who are dominating in the market would not be affected by the decision, he said.

Finance minister was also convinced and decided to not to change the proposal till Sunday, but he has to bow down to the pressure from beneficiaries to review the proposal, he said.

There are approximately 29.79 lakh beneficiary owner’s accounts in the country.

The revenue board expected to collect nearly Tk 200 crore from tax on capital gains. Now the amount will be significantly low.

Bangladesh: Govt unlikely to withdraw tax on stock investors’ capital gains

Dhaka, June 24 (New Age): Tax on realised gains from stock investment is likely to remain unchanged in the next budget as the government decided not to change the provision in the proposed Finance Bill-2014, officials of the finance ministry said. On the other hand, the government may increase the tax exemption on dividend income up to Tk 20,000 that the investors get from the listed companies from the proposed Tk 15,000, they said. The government may also offer tax rebate for the companies listed in the share market. The companies which will pay dividend more than 40 per cent will get 10 per cent tax rebate on their income tax, according to the proposed amendment. Earlier, companies would get 10 per cent rebate if they gave 20 per cent dividend but the provision was scraped in the proposed finance bill. The government may also exclude from the finance bill a provision that proposed to allow cost and management accountants to conduct audit and certify financial reports under the tremendous pressure from the Institute of Chartered Accountants of Bangladesh. It may also scrap a provision making mandatory for partnership, enterprises and professionals with income exceeding Tk 5 crore a year to submit audited account statements to the NBR. Finance minister AMA Muhith on June 5 placed the finance bill in parliament proposing 3 per cent tax on individual investors with more than Tk 10 lakh but less than Tk 20 lakh capital gain in a year from the stock market and 5 per cent tax on capital gain above Tk 20 lakh. Investors protested against the decision and demanded withdrawal of imposition of gain tax. The country’s two bourses also reacted sharply with ups and downs in the market. Experts also criticised the decision saying that though the imposition of tax on higher capital gain was right but it was not the right time to do so and the decision would put a negative impact on the already volatile market. The National Board of Revenue officials said that the finance minister on Sunday instructed them to keep the provision unchanged in a bid to bring people with more income under tax net and collect revenue from the sector. The government thinks that those who earn above Tk 10 lakh a year from share market should pay tax, they said. Small and medium investors will not be affected due to the imposition of gain tax, they said. Earlier, capital gain from the stock market was tax-free. Bangladesh Securities and Exchange Commission, Dhaka Stock Exchange and Chittagong Stock Exchange were demanding to scrape the new provision saying that the imposition of gain tax would create significant effect on the market. On the other hand, investors get tax exemption on dividend up to Tk 10,000 and they have to pay tax at the rate of 10 per cent on the amount above Tk 10,000. In the proposed finance bill, the government proposes to increase the tax-free dividend to Tk 15,000 which now will be Tk 20,000. Demutualised DSE and CSE will enjoy tax holiday for the next five years until in a way the finance minister proposed in the finance bill. Finance minister proposed tax holiday in a graduated rate for the exchanges but they demanded for absolute tax holiday for next 5 years.