Undeclared money will revive market if allowed in stocks

An association of retail investors has demanded that undeclared income be allowed for investment in stocks to save the moribund equity market.

The market index tumbled to a five-year low while market capitalisation has been reduced by around Tk 1.2 trillion since the formation of the interim government.

The daily trade volume now hovers only around Tk 2.5 billion, which is a reflection of not only a fragile market but also a lifeless market where investor confidence has hit rock bottom.

"It is necessary for the interim government to take immediate steps to overcome this situation," said SM Iqbal Hossain, president of the Bangladesh Capital Market Investor Association, a platform of retail investors, at a press briefing on Wednesday.

"This is not merely a correction. It is a systemic breakdown. Urgent, bold action is needed to revive the struggling market and restore investors' faith," said Mr Hossain.

He suggested creating an opportunity for investment of undeclared money in stocks with a three-year lock-in period.

"During the lock-in-period, investors will not be allowed to withdraw their investment; they can only take away dividend income," said Mr Hossain.

He said he believes allowing undeclared money in the stock market will help its recovery and the much-needed liquidity problem will be resolved.

Currently, the real estate sector is where people can inject their undeclared money. The interim government in the proposed budget for FY26 kept the provision of black money whitening through investments on land and apartments.

Although the facility remains in place, the tax rate on such investments has been significantly increased this year, compared to previous years.

Mr Hossain said investors expected some incentives for revival of the stock market, removal of capital gain tax on individuals and tax exemption on dividend income up to Tk 0.1 million for example, in consideration of the present market scenario.

The proposed budget was expected to be a turning point to reverse the market sentiment, he said, "but general investors did not get any direct incentive in the proposed budget".

Though the budget relaxed conditions for a tax rebate of 2.5 percentage points for listed companies to 20 per cent tax rate, widening the tax gap with non-listed peers to 7.5 percentage points, the gap still is much lower than the recommended 10 percentage points, reads a press statement issued by the association.

Merchant banks, currently taxed at 37.5 per cent, are set to receive tax relief with a proposed cut to 27.5 per cent, a move that will support institutions but offers little to retail investors.

Moreover, the budget proposed reducing tax at source on brokerage transactions from 0.05 per cent to 0.03 per cent, a modest change that will mainly benefit intermediaries, not general investors, Mr Hossain said.

"These adjustments, while not entirely without merit, largely benefit financial institutions and fail to offer meaningful relief to retail investors who drive market momentum."

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