Stockbrokers lament federal budget
KARACHI: Federal budget for fiscal year 2015-16 (FY 16) is apparently hinting government is interested in promoting black money or trying to force decent tax paying investors to invest in real estate sector, stock brokers say.
Instead of giving incentives, Finance Minister Ishaq Dar has dismayed taxpayer investors by increasing taxes further as none of Karachi Stock Exchange (KSE)’s proposals have been considered in federal budget, said KSE brokers. KSE-Stock Brokers Association (SBA)’s secretary Ansar Mahmood said though Ishaq Dar has assured KSE to revise decision, but if it did not withdrawn, KSE-SBA would consider taking matter in to the public courts. He said government has not given up tinkering with capital gain tax (CGT) on securities as rate of CGT should not be more than 5 percent for 10 years to stimulate investors’ confidence.
Most of investors are unable to hold their investment on a long-term basis due to weaker holding power and abrupt changes in government policies. Since majority of investors hold investments for less than a year, they would generate more volumes and hence more revenue if the tax rate for one year is 5 percent. The government has raised tax on dividends. Dividend tax is double taxation as the dividend is distributed out of income of the Companies on which they have already paid their taxes.
Moreover, discrimination has been made in tax slab on ?xed and risk free income ‘ by taxing it at 10 percent whereas risk bearing investment is targeted with a higher slab. Tax on bonus shares, which is not an income, has been retained. A close look at proposals in the budget indicates rather than increasing tax base, government has increased tax rates on ‘captive taxpayers like corporate and salaried class’. Dar knows all investors at the stock exchanges are fully documented and can trade only on the basis of UIN (Unique Identification Number-generated by NCCPL), which is based on CNIC of each investor.
They are required to pay Securities and Exchange Commission of Pakistan, KSE, Central Depository Company, National Clearing Company of Pakistan, SRB (Excise Duty) and Capital Value Tax, commission, CGT and double taxation on dividend incomes. As against this documented and tax compliant sector, government rewarded real estate, a depository of black money by making it tax-free. Imposing taxes on companies those have more than 100 percent reserve of their paid up capital, is patently illegal, it added. The so-called tax is investors’ money. If at all, the entire tax be passed on a dividend to shareholders, preferably other than sponsors, the logical things was to accept KSE’s proposal of distribution of 50 percent cash dividend out of current years profits if the reserves exceeded 100 percent of the paid up capital. Imposition of 0.6 percent tax on filers on all banking transactions seem impractical as it is really difficult to determine non-filers because even filers are sometimes penalised by deduction of 15 percent tax on their dividend.Categorising non-filers amongst widows, pensioners and low paid salary persons for banks will also be a complex task. While these kinds of measures will force people to deal in cash preferably foreign currencies rather than using banking channel. The entire budget needs serious review to make it sensible and practical the KSE SBA is willing to guide and advise the government in this regard.
