The Capital Market Stabilization Fund (CMSF) is being developed by the government as a “dividend hub” or central dividend distribution agency. The process of fortifying the institution’s legal foundation and broadening its purview is in progress in order to accomplish this aim.

The plan calls for the direct transfer of listed companies’ dividends into CMSF going forward. Investors will then receive their share of it. CMSF will take taxes out of the investors’ dividends and put them in the government treasury during this procedure. Investors won’t have to deal with the inconvenience of obtaining tax certificates one at a time, which is a frequent issue in the existing system.

June 2021 saw the formation of CMSF. Its primary goals were to supply market liquidity and pay unallocated dividends. The organization has paid out roughly Tk 94 million in cash and Tk 305 million in dividends on shares thus far.

Nojibur Rahman, the principal secretary of the ousted Prime Minister Sheikh Hasina, was appointed chairman of the CMSF board and tasked with overseeing the fund. There was harsh criticism of the fund’s relevancy and its arbitrary use following the August 5, 2024, change of government. While the entire operating expenses for the fiscal year 2021–2022 were Tk 2.4 crore, it is known that Tk 1.9 crore was spent solely on honoraria and events.

In response, Al-Amin, an associate professor in the Department of Accounting at Dhaka University and a specialist in the stock market, stated that CMSF was established in order to rehabilitate Nojibur Rahman. As a result, the stock market saw significant losses. It was necessary to deposit the funds that were there as the company’s operating capital into CMSF. In theory, I oppose the idea that fund funds will be utilized for endless meetings or to spend anyway they choose with the interest.

CMSF has attempted to open a foreign exchange account at Madhumoti Bank in order to pay Bangladeshis living abroad unallocated dividends. However, Bangladesh Bank then requested that the account opening procedure be stopped, pointing to the fund’s shaky legal foundation. In light of this, at a recent meeting at the Finance Ministry, a suggestion was made to turn CMSF into a “statutory” or legal fund. This is said to have been approved by Dr. Salehuddin Ahmed, the finance advisor.

CMSF previously used the Investment Corporation of Bangladesh (ICB) to invest in a few stocks. Additionally, CMSF is the creator of the ICB AMCL CMSF Golden Jubilee Mutual Fund. The market has criticized these actions.

Companies currently pay out dividends and issue tax certificates independently, which makes things difficult for taxpayers. Taxes on dividend income are 20 percent for individuals without a Tax Identification Number (TIN) and 15 percent for those with one. The certificate must be included in the income tax return in order to stop tax avoidance. The company’s tax certificate is frequently unavailable online, and because there are few incentives, many people are not interested in picking it up.

According to the concerned parties, investors would be able to get the tax exemption through a single invoice against the combined dividends if the CMSF assumes responsibility for their distribution centrally.