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Budget FY22-23 Will Enhance Public-Company Earnings

Government officials have announced plans to raise taxes on imported items to safeguard native industries and grant tax breaks and exemptions for enterprises, which analysts say will assist the region’s sectors. Tax exemptions on imports of raw materials in productive industries and VAT exemptions at the supplier level would cut manufacturing costs for businesses. In their budget analyses, EBL Securities, LankaBangla Securities, Green Delta Capital, and Sheltech Brokerage Limited expect this to lead to the companies making more money.

In its assessment on Thursday’s proposed budget by Finance Minister AHM Mustafa Kamal, the Sheltech Brokerage stated that the tax-related standard operating procedure supplied to publicly traded companies will assist these companies in increasing their profits.

According to EBL Securities, the source tax on raw materials supplied to cement and steel makers has been reduced from 7% to 4%.¬†This reduction on the delivery of raw materials to manufacturers will boost cement and steel product producers’ profitability. Again, the construction material prices are likely to fall, lowering construction expenses and benefiting real estate companies.

Because their corporation tax rate has dropped to 12% in a single jump, analysts say exporters outside the RMG sector like Apex Footwear, Fortune Shoe, Apex Foods, BSRM, MI Cement, Square Pharma, Beximco, and Bashundhara Paper will benefit the most from this budget. Officials from these corporations stated that those with local enterprises must keep two accounts in order to benefit from tax breaks on exports.

According to LankaBangla Securities, “Except for telecommunications, financial institutions, merchant banks, and all publicly traded companies with 10% IPO issues, will now experience a corporation tax rate of 20%, as opposed to 27.5% for non-publicly traded companies in the same industry. This tax break is intended to encourage enterprises to list on the stock exchange.”

TDS on interest income was suggested to rise from 10% to 20% as part of the budget. According to stock market analysts, the increased TDS on interest income may make fixed deposit receipt (FDR) in the money market less profitable for firms, causing them to avoid banks and non-banking financial organizations. As a result, their capital may eventually move to the stock market.

According to a study by LankaBangla Securities, “Up until recently, capital gains on government securities have been exempt from taxation. However, the budget has created a fair playing field by implementing the capital gains tax on government securities. As a result, banks and other financial organizations who frequently participate in these securities may be more interested in the stock market now than previously.”

LankaBangla Officials further stated that the tax rebate had been set at 15% on qualified sums to encourage capital market activity. Currently, 350 firms are listed on stock markets. There are 110 financial institutions among them, with the remainder being manufacturers and service providers.

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