KARACHI, April 21 (INP) – Association and number of securities companies including Topline Securities have recommended restructuring of collecting tax on capital gains along with specific holding period as it would not only increased volume but it would discouraged the parking of funds in real estate sector which has been dumping ground of black economy.
Pakistan Stock Brokers Association in their budget proposals for year 2018-19 gave rationale for proposed changes in capital gain tax. Currently Capital Gain Tax CGT) has been collected at a rate of 15 percent for filer and 20 percent for non-filer for any specific holding period. However, if shares purchased before July 1, 2013 they are tax exempted. CGT on disposal of securities has been excessive.
Immovable properties have become a dumping ground for black economy whereas investment in securities can neither be manipulated nor can be made out of the black economy. Stock market investors deserve the same treatment as the investors in the real estate.
Currently capital gain tax on disposal of immovable property where holding period is less than a year tax rate has been 10 percent, equal to one year but less than 2 years 7.5 percent, equal to 2 years but less than 3 years 5 percent and equal to three years and more has been exempted from tax. Topline Securities in its reported quoted budget proposals of PSX which proposed CGT to be reduce to 10 percent if holding period is less than six months, 8 percent for securities holding period between six to 12 months and no CGT having holding period of more than 12 months.
“We expect the government to reduce the CGT tax incidence for filers along with specific holding period. However relief for non-filers may not be forthcoming given the government’s continued focus on increasing the number of filers”, the Topline report said.
Moreover, tax relief on filers could bode well for the market. Samiullah Tariq director research at Arif Habib Securities proposed new CGT structure should be 10 percent tax if holding period is up to one year, 9% for the period of one to two years and 8% for 2-3 year period holding and investors holding above three years it should be exempted.
He said that the tax rate should be similar to real estate sector. Moreover reduction in tax rate will help federal government on grounds that the revenue from this source would jack up and more over it will help government to comfortably sell their stakes through capital market.
Moreover it would attract general public to park their savings in stock market and would certainly help companies to off load their shares or listing might show increase at local bourse.