KARACHI: Prime Minister Imran Khan has assured stock brokers to rationalize taxation regime on stock market and equity trading.
A meeting of PSX delegation lead by the Chairman Sulaiman S Mehdi, Board Members, prominent brokers and business men including Aqeel Karim Dhehdi, Arif Habib and Basheer Janmohammad was held Sunday with the Prime Minister along with Finance Minister Asad Umar and other prominent members of the Cabinet at the Governor House.
Astatement issued by the Pakistan Stock Exchange said the meeting was very fruitful and the following points were discussed and agreed to revive the investors confidence at PSX:
1. Advance Tax of 0.02% on purchase and sale of shares (both sides) to be reduced to 0.01%, however on the request of the Chairman PSX, the FM agreed to consider abolishing it completely. This has no tax revenue impact on GOP being an adjustable tax;
2. Allow carry forward of capital losses upto 3 years;
3. Rationalisation of Taxation of Holding Companies on inter corporate dividend;
4. Rationalisation of Capital Gain Tax on Equities in line with Real Estate in the next budget;
5. Promote listing of government of Pakistan and China Pakistan Economic Corridor (CPEC) projects debt at PSX;
6. Help curtail over regulation over brokers for promoting equity investments.
Itwas also agreed that the proposed changes will be enacted on fast track.
A statement issued by PSX Brokers Association said the PM was apprised that earlier suggestion was to reduce rate of Advance Tax U/S 233A to 0.01%-adjustable or 0.005% final, but keeping in view the recent devaluation and increase in interest rate, it is strongly suggested to abolish it all together.
The association suggested that like civilized countries law should be made that on completion of assessment, excess tax withheld be automatically refunded. This will bring in much needed liquidity, it said.
The statement said that Capital Gain Tax (CGT) be rationalized with the other class of investment – immovable property.
The government is missing revenues as FBR is not taking notice of a change in the definition of the term “Security” by a court order. FBR be directed to take suitable measures to counter its disastrous affect on corporate world.
Capital loss on disposal of securities, in ready market falls U/S 59 while speculation loss on disposal of securities in derivative market falls U/S 58.
It is illogical that carry forward of losses is not being allowed on disposal of securities u/s 37A.
Capital Value Tax (CVT) is collected on purchase of shares and was imposed in the absence of CGT, therefore, after the imposition of CGT, CVT must be abolished.
Tax on Dividend at the rate of 15% is discouraging the corporate culture and tantamount to tax on already tax paid income.
It may be completely abolished or reduced to 10%, the association suggested.
Tax on inter corporate dividends is discouraging the xorporate culture and holding company concept and it should be completely abolished.
To encourage listing on Stock Exchange, corporate tax for listed companies needs to be reduced so that some incentive is created for companies to get listed.