Importance of Taxes

Governments impose charges on their citizens and businesses as a means of raising revenue, which is then used to meet their budgetary demands. This includes financing government and public projects as well as making the business environment in the country conducive for economic growth.

Importance of Taxes in Society

Without taxes, governments would be unable to meet the demands of their societies. Taxes are crucial because governments collect this money and use it to finance social projects.

Some of these projects include:

  • Health

Without taxes, government contributions to the health sector would be impossible. Taxes go to funding health services such as social healthcare, medical research, social security, etc.

  • Education

Education could be one of the most deserving recipients of tax money. Governments put a lot of importance in development of human capital and education is central in this development. Money from taxes is channeled to funding, furnishing, and maintaining the public education system.

  • Governance

Governance is a crucial component in the smooth running of country affairs. Poor governance would have far reaching ramifications on the entire country with a heavy toll on its economic growth. Good governance ensures that the money collected is utilized in a manner that benefits citizens of the country. This money also goes to pay public servants, police officers, members of parliaments, the postal system, and others. Indeed, with a proper and functioning form of government, there will be no effective protection of public interest.

Other important sectors are infrastructure development, transport, housing, etc.

Apart from social projects, governments also use money collected from taxes to fund sectors that are crucial for the wellbeing of their citizens such as security, scientific research, environmental protection, etc.

Some of the money is also channeled to fund projects such as pensions, unemployment benefits, childcare, etc. Without taxes it would be impossible for governments to raise money to fund these types of projects.

Furthermore, taxes can affect the state of economic growth of a country. Taxes generally contribute to the gross domestic product (GDP) of a country. Because of this contribution, taxes help spur economic growth which in turn has a ripple effect on the country’s economy; raising the standard of living, increasing job creation, etc.

Wealth management and its importance

When you ask a majority of people what wealth management is all about, you can be sure that not many of them know the appropriate definition. A majority will tell you they have heard of the term but cannot elaborate what exactly is wealth management. Wealth Management is a discipline that involves investing and it incorporates various financial disciplines like financial planning, a portfolio of investments among others. However, with many people taking necessary steps to manage their finances the creation of wealth management services has seen a rise in wealth management UK.

Business and individuals are now turning to financial consultancy companies for advice and guidance on wealth management. It is important to know that when wealth grows the complexity of handling it also increases. The way to handle growing assets proves difficult for a majority of successful people and businesses. This is why they turn to wealth management consultancy guides to help them appropriately manage their increasing wealth.

Here are a few other reasons why management of wealth is important.

Wealth management assists people and business to maintain their current lifestyles. It allows people with a vast range of assets to manage them. The advice they receive from wealth management advisors assists them to bridge the gap between the reality of their wealth and the perception of their wealth.

It allows them to leave an appropriate inheritance for their families. People with widespread assets may not even recognize that some of their assets are not included in their wills. However, with wealth management, they are able to determine the range of their total wealth. This helps in leaving a sizable inheritance for their families.

With wealth management UK, a business gets to determine how much is enough. They are able to set significant standards to assist them to create more wealth suitable for their company or family. It also ensures a person or business sets up objectives allowing them to create more wealth if they desire to.

It allows the young people to think of retirement savings. Wealth management ensures the young people begin setting the goals and objectives for retirement at an early age. The advice they receive from financial institutions allows them to check the retirement box, live a debt free life while working and manage the assets they acquire for them and their future generations.

It allows individuals to grow in terms of appropriate making appropriate financial decisions. Wealth management allows people to think outside the box when it comes to saving and setting up other business that will help them create more wealth.

Various banks and financial institutions guide their clients when it comes to appropriate methods to manage their wealth. They work closely with all their clients to ensure they set up investment strategies that will enable them to maintain and increase their wealth.

They understand the needs their clients have and assist them in coming up with services that suit them best.

Why is personal finance important?

Why is personal finance important? Have you ever sat back to think why personal finance is such an essential aspect of your life? Well, sometimes we are so caught up in the daily activities that we forget how crucial it is.

This article will try to answer just this question. We must understand the reasons why we must manage and plan for our money at every step of life.

Without personal finance, it possible to live a life of bondage without knowing how to get off debts or adequately pay for your bills.

When seeking financial freedom, personal finance plays a significant role. Therefore, having the necessary personal finance skills will help you to ensure all your money is managed well. This will help propel you to a bright financial future.

When we talk about personal finance, the term is usually used to refer to the financial management of an individual or a family’s resources. It comprises of how you manage your money through expenditure, investments, and savings, considering various life events and risks.

Other aspects of personal finance include banking, budgeting, retirement planning, insurance, and estate planning, and more.

The term can stand for the entire financial industry in an individual’s life. This includes all the institutions that offer financial services to an individual.

Personal finance focuses mainly on meeting the individual or a person and caters for both long and short term financial goals. Whether you have enough money for your essential monthly bills or you want to plan for your retirement, this is all personal finance.

Being financially literate helps a person to distinguish between financial decisions that will be beneficial, and that will be detrimental to their financial future. Having a plan for your finances will help you meet your short and long-term needs, without going beyond your income limits.

Retirement Benefits for workers

It is unthinkable that out of the total workforce estimated at 6.35 crore, only 4 per cent get pension or retirement benefits. The remaining 96 per cent of the work force, as New Age reported on Tuesday, includes farm hands, apparel workers, other private-sector factory workers, construction workers and day labourers. Non-payment of retirement benefits adversely affects the post-retirement life of the workers who do not get pension or retirement benefits. As Sramik Karmachari Oikya Parishad, a platform of labour organisations, says, because of profit motives, most employers have a propensity to rule out payment of proper wages. It is, therefore, not surprising that they refrain from paying retirement benefits to workers although non-payment of retirement benefits is tantamount to violation of the Bangladesh Labour Act 2006 that makes it mandatory for employers to pay gratuity to all workers. All this is a testimony to the fact that exploitation of workers by the owners of private sector industries has reached the furthest limit.
The Bangladesh Employers’ Federation says that formal-sector workers alone were entitled to get gratuity and that he is not sure whether retirement benefits and gratuity are paid to all. The labour law makes it mandatory to pay ‘gratuity’ equal to at least last 30 days’ wage for each year of service to any worker with nine years’ service and it is also legally binding on employers to ensure that a worker with more than 10 years’ service gets gratuity equal to 45 days’ wage for each year of service, to be calculated on the basis of the last year’s monthly wage. The workers of the industrial sector are not allowed pension at the time of retirement except that only an amount of gratuity is provided. In the absence of pension, workers and their families after retirement face financial constraints as they become physically and mentally weak for old age. They hardly get jobs elsewhere. They along with their dependants remain in financial insecurity throughout their old age. Worse still, the government lacks the initiative to enforce the law to see that all labourers get retirement benefits and employers comply with the law in complete adherence to all rules so that not a single member of the workforce is exploited. One can hold responsible the pervasive commercialisation pursued for decades by successive governments which, seemingly, has resulted in this kind of avarice on part of a large section of the employers. Commercialisation is a policy that allows the government to shrug off its responsibility to see whether all rules are being abided by the employers.
The government needs to take expeditious steps to ensure that all workers are paid their pension and other retirement benefits in accordance with the law after retirement.

How Money Markets work

A money market is basically a safer form of mutual fund, which begs the question: What’s a mutual fund? When you and several other people give an investment firm money, which is then pooled together and invested in stocks, bonds and other investment securities, it is known as a mutual fund. If you direct the money to be invested in a money market fund, the investment firm is legally required to put the money into low-risk options such as government securities and certificates of deposit, the idea being that you are far less likely to lose your principal investment.

Dividends   

The most important thing on your mind is how you’ll make money with a money market fund. Your money is invested into low-risk securities, which, according to the U.S. Securities and Exchange Commission, try to keep their net asset value (NAV) at $1.00 per share, with the yield increasing or decreasing. You don’t have to worry about your money being locked up in a money market for a long period of time, because unlike other low-risk investments, you can get your money out at any time. You are usually paid your dividends within seven business days.

Advantages

The most talked-about advantage of a money market fund is that it is generally a low-risk investment, which is ideal for first-time investors who are hesitant to take big risks with their hard-earned cash. Money markets are also great for storing cash, similar to a savings account, only with a somewhat higher return. They can be a great option if you are looking to get a little extra money together for a new car, or to get those credit cards paid off.

Disadvantages

Money markets are definitely not ideal if you’re looking for ways to make a lot of money in a hurry. As with any low-risk investment alternative, returns are not as high as riskier alternatives. Money markets are not federally insured, and while they are touted as a safer, low-risk investment option, money market funds are still an investment, which means there is a chance you could lose your money.

Start up Equity

Startup equity is one of those things that it’s fair to say every startup founder without an MBA struggles with. Most people don’t have to think about this stuff until it’s really important. But if you’re starting to freak out about who gets what slice of your startup pie, take a deep breath, calm down, and get ready for Startup Equity 101.

Equity. Stocks. Shares. Vesting. Fair market value. The minute you dive into figuring out startup equity compensation, you’re slammed from every side with a bunch of words that you might have heard in the past and you might be able to fake knowledge of at a dinner party.

But let’s be real: You definitely don’t have an active, working knowledge of them. One paragraph in to any explanatory blog post and your eyes are already crossing, your fingers itching for the Facebook tab on your browser because all you want is to clear your brain with a mindless scroll through News Feed.

So before we dive into different ways to split up the startup equity distribution, let’s take a look at what all of these new words actually mean. Feel free to come back to this list as we go if you’re feeling lost.

Let’s start with the most basic of basics: Who actually gets startup equity. There are four groups that typically get a portion of the startup pie:

  • Co-Founders
  • Advisors
  • Investors
  • Employees

Every startup will offer equity to some combination of those four categories. But not every startup is going to offer equity to employees; not every startup is going to offer equity to advisors; and not every startup is going to take on investors.

But it’s a fair bet to say that every startup is going to have to figure out how to structure and portion out equity to the founders of the company. So let’s start there.

Investment facilities in Bangladesh

Private sector is the main engine of economic growth in Bangladesh. The government therefore attaches high priority to private investments, both domestic and foreign, and has been relentlessly working for ensuring an ideal investment climate through policy and institutional supports, infrastructure improvements, administrative and regulation reforms, modernization of financial institutions, and special incentive packages. Government has also established export processing zones as well as economic zones where privileged treatment and special package are offered to investors. Such initiatives have enabled Bangladesh to maintain a GDP growth rate of over 6% on average for more than a decade and also to double its export earnings in just five years despite slow pace in the recovery of global economy. Owing to robust economic growth for consecutive years, Bangladesh has recently graduated to the status of a lower middle-income country with per capita income hovering around US$ 1,314 at the moment.

Bangladesh is now a highly competitive location for commercial ventures in terms of costs, inputs, human resources, size of the domestic market, access to international markets, trade facilitation, investment protection including consistency in policies, socio-political stability etc. Inflow of FDI is on continuous rise for last few years and the inbound FDI rose by 24% year-on-year basis to US$ 1.83 billion last year. Following would give an overview on current investment climate in Bangladesh:

Bangladesh offers a unique winning combination of high connectivity, rapidly expanding huge domestic market, privileged access to international market, business-friendly environment and competitive cost structure that creates the opportunity for best return on investments.

Bangladesh is geographically located in the cross road of East Asia, South East Asia and South Asia, three most dynamic regions of Asia. Such unique location provides the country a greater access to international maritime and air routes. Country is also rapidly developing its core infrastructures like roads, highways, surface transport and port facilities to further improve multi-modal connectivity to emerge as a leading regional business and communication hub.

Importance of hedge funds

The role that hedge funds are playing in capital markets cannot be quantified with any precision. A fundamental problem is that the definition of a hedge fund is imprecise, and distinctions between hedge funds and other types of funds are increasingly arbitrary. Hedge funds often are characterized as unregulated private funds that can take on significant leverage and employ complex trading strategies using derivatives or other new financial instruments. Private equity funds are usually not considered hedge funds, yet they are typically unregulated and often leverage significantly the companies in which they invest. Likewise, traditional asset managers more and more are using derivatives or are investing in structured securities that allow them to take on leverage or establish short positions.

Although several databases on hedge funds are compiled by private vendors, they cover only the hedge funds that voluntarily provide data.1 Consequently, the data are not comprehensive. Furthermore, because the funds that choose to report may not be representative of the total population of hedge funds, generalizations based on these databases may be misleading. Data collected by the Securities and Exchange Commission (SEC) from registered advisers to hedge funds are not comprehensive either. The primary purpose of registration is to protect investors by discouraging hedge fund fraud. The SEC does not require an adviser to a hedge fund, regardless of how large it is, to register if the fund does not permit investors to redeem their interests within two years of purchasing them.2 While registration of advisers of such funds may well be unnecessary to discourage fraud, the exclusion from the database of funds with long lock-up periods makes the data less useful for quantifying the role that hedge funds are playing in the capital markets.

Even if a fund is included in a private database or its adviser is registered with the SEC, the information available is quite limited. The only quantitative information that the SEC currently collects is total assets under management. Private databases typically provide assets under management as well as some limited information on how the assets are allocated among investment strategies, but they do not provide detailed balance sheets. Some databases provide information on funds’ use of leverage, but their definition of leverage is often unclear. As hedge funds and other market participants increasingly use financial products such as derivatives and securitized assets that embed leverage, conventional measures of leverage have become much less useful. More meaningful economic measures of leverage are complex and highly sensitive to assumptions about the liquidity of the markets in which financial instruments can be sold or hedged.3

Although the role of hedge funds in the capital markets cannot be precisely quantified, the growing importance of that role is clear. Total assets under management are usually reported to exceed $1 trillion.4 Furthermore, hedge funds can leverage those assets through borrowing money and through their use of derivatives, short positions, and structured securities. Their market impact is further magnified by the extremely active trading of some hedge funds. The trading volumes of these funds reportedly account for significant shares of total trading volumes in some segments of fixed income, equity, and derivatives markets.5

In various capital markets, hedge funds clearly are increasingly consequential as providers of liquidity and absorbers of risk. For example, a study of the markets in U.S. dollar interest rate options indicated that participants viewed hedge funds as a significant stabilizing force. In particular, when the options and other fixed income markets were under stress in the summer of 2003, the willingness of hedge funds to sell options following a spike in options prices helped restore market liquidity and limit losses to derivatives dealers and investors in fixed-rate mortgages and mortgage-backed securities.6 Hedge funds reportedly are significant buyers of the riskier equity and subordinated tranches of collateralized debt obligations (CDOs) and of asset-backed securities, including securities backed by nonconforming residential mortgages

Bangladesh Capital market goes down

The country’s stock investors had to tolerate a painful year in 2019. Market key index, DSEX, witnessed seven-year record correction of 17.3% or 932.7 points against negative return of 13.8% in 2018.

Market sentiment observed bearish on few factors like spike of interest rate, liquidity crisis, aggressive bank borrowing by govt, Taka depreciation against USD, declining outstanding foreign portfolio investment, sluggish earning growth and poor payout ratio of listed companies.

Tussle between Grameenphone and the government, and post-dividend free-fall price adjustment of Square Pharma continued to hurt the market.

Meanwhile, a drastic fall in the price of large cap stocks namely Square Pharma, United Power and BATBC contributed to the market remaining on the decline in the outgoing year.

Dhaka Stock Exchange Brokers’ Association (DBA) President Shakil Rizvi told Dhaka Tribune that the investors were grappling with the prolonged bearish trend, liquidity crisis in the country’s financial sector specially leasing firms, and Grameenphone’s tussle with the telecom regulator BTRC.

Analysts and market insiders also pointed out lack of good companies in the market as the primary reason behind the falling market index. Another major reason cited by them is investors’ confidence crisis.

To attract good companies, experts suggest simplification of the process of listing and bringing government and multinational companies to the market to become examples for others.

Former adviser to a caretaker government AB Mirza Azizul Islam told Dhaka Tribune: “The stock market is a great source of funds, but its true potential is still untapped”.

“To attract entrepreneurs, the government has to set an example by offloading shares of state-owned companies [to the stock market],” he said.

Life Insurance – A growing industry in Bangladesh

Life Insurance – A growing industry in Bangladesh

Living in a high growth era, people in Bangladesh are on the path of experiencing prosperity through increase in per capita income, entrepreneurship development, consumption growth and rapid urbanisation. The emerging Asian Tiger is reaching out at the global stage and competing with some of the finest businesses with its appetite for growth and overall development.

As the economy grows and standard of living improves, insurance is considered to be a vital risk-mitigating weapon. Life insurance, in particular, supports sustainable development by mobilising long-term capital that leads to wide-scale infrastructure building and creation of more jobs. The cycle of protection, savings, investment and more protection is at the heart of life insurance.

Currently, overall insurance penetration in the country is approximately 0.57 per cent compared to Thailand’s average of 5.27 per cent, Malaysia’s 4.77 per cent, China’s 4.22 per cent, India’s 3.7 per cent, Indonesia’s 1.95 per cent and Sri Lanka’s 1.15 per cent. This indicates that emerging Asia Pacific economies are leveraging the benefits of insurance for growth and development.

While there is a reason to be worried about lower level of insurance penetration in Bangladesh, there is the bigger picture – an opportunity which is unexplored and which represents huge potential in view of the economic growth in excess of 8.0 per cent. With rapid poverty reduction and a growing size of the middle class, the country is witnessing an upsurge in domestic consumption coupled with bigger dreams and aspirations of the youth.

A society which is witnessing a shift from ‘survival mode’ to ‘thriving actions’ needs support of a structured financial management tool in the form of insurance. The Bangladesh people today are more educated, and determined to take risks, participating in competition at global platforms. Young entrepreneurs are creating employment opportunities and continuously focused on upgrading their lifestyle. The country’s economic progress has empowered the people with higher purchasing power and hence, insurance as a tool becomes necessary to safeguard them from financial risks.

There are 78 insurance companies – 32 life and 46 non-life – operating in the country at present. In 2018, Bangladesh’s insurance premium earnings rose by 11.06 per cent to Tk 124.165 billion, according to data available with the Insurance Development and Regulatory Authority (IDRA). The gross premium from life insurances stood at Tk 90.20 billion in the year, up by 10.10 per cent while premium of non-life insurance stood at Tk 33.97 billion showing 13.92 per cent rise. Life insurers disbursed a total claim payment of Tk 65.71 billion with the claim settlement ratio of 88.51 per cent.