ISLAMABAD: The PSX Stockbrokers Association has asked the Federal Board of Revenue (FBR) to rationalise the rate of capital gains tax (CGT) on shares trading and use the levy as a tool to incentivise investments. The brokers association urged that the FBR to resolve their concerns and reap the benefits of expected economic boom once the Covid-19 pandemic is over.
A delegation of the brokers association has recently presented their set of demands to the FBR which include rationalisation in the rate of CGT which is 15 per cent on trading of shares and 10pc on mutual funds.
The brokers highlighted that the move was initiated in the middle of the 2000s to promote the mutual funds and the relief period has to be abolished in the next federal budget.
The other key demand of the stock brokers was that the CGT should be used as a tool to encourage and incentivise investments in the bourse. They suggested that CGT rates should be reverted to the pre-2016 level.
Earlier, the CGT was 15pc if the shares were sold within one year of purchase, 10pc if sold within two years and 5pc if disposed of within three years. They urged CGT should be abolished if the holding period was less than three years.
The brokers maintained that the rate incentives would promote the practice of saving in securities.
The association also highlighted that withholding tax was 12pc at transactions in the Pakistan Mercantile Exchange and the Pakistan Stock Exchange for the institutions, whereas the same was 3pc for the individuals. The stock brokers have demanded the FBR reduce the withholding tax for the institutions as well in the forthcoming budget.
The other issue raised by the association was related to a decision of the Sindh High Court which had given its verdict on the definition of the word “security”. The brokers association urged the FBR to streamline this complicated matter.
The association have also demanded the FBR notify the decision of the government made in the Federal Budget 2020-21, allowing the brokers to carry forward the losses for the next three years.
The brokers said the facility to carry forward the losses was available to them but it has been highlighted that without the notification there were fears that the FBR could start charging CGT from them.
The delegation of the stock brokers association also held a meeting in the Securities and Exchange Commission of Pakistan (SECP) to discuss the new anti-money laundering regime and they stressed that know your customer (KYC) regime was a duplication of work, because it was already done by the banking sector.
The association has demanded the SECP ease the stringent regulations in this regard for the capital markets.
Published in Dawn, January 17th, 2021