5 Probable Impacts of 10% Tax on Reserves & Retained Earnings

Topic: 5 Probable Impacts of 10% Tax on Reserves & Retained Earnings | Dhaka Stock Exchange | DSEBD | DSE | CSEBD | CSE This presentation will attempt to describe the following topics 1. Many a time we see companies are in profit but don’t give dividend. Now they will give some dividend which is good. Companies will maintain minimum 30% dividend payout to avoid tax which is positive. Companies will not stay in Z category when they have positive EPS. 2. Earning manipulation will increase if company doesn’t wants to increase cash dividend. Companies’ income might be drained out from the company. 3. Companies having good reserves and retained earnings will be discouraged to become listed in stock exchanges. 4. More cash dividend might hamper the business expansion. If more cash dividend is given, company may face problem for expanding its business. If they take more loan for expansion, interest expense will be increased which will lower the profit of the company which will lower the share price. 5. What about companies which has very low EPS i.e. 0.02? In such case company might not distribute stock dividend to avoid tax. They will have to incur tax on retained earnings and reserves if they don’t give dividend. In such case company will try to show loss in Income Statement. These rules are forcing companies to go for earning manipulation. Presented by Shihab Alam Khan on behalf of Finance School

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