ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has submitted proposals to the Federal Board of Revenue (FBR) seeking tax rationalisation in the upcoming finance bill, primarily with the aim to promote development of regulated non-bank financial market and the corporate sector.

The SECP has submitted seven proposals to the FBR and has highlighted that rationalisation of taxes would also help implement the government’s tax reforms under the Capital Market Development Plan and Future Roadmap 2020-27.

These proposals include providing a level playing field to private funds and the SECP has said that the FBR has negligible tax revenue collection from the private equity & venture capital (PE&VC) funds the industry was still at very nascent stage.

“These sophisticated market participants will eventually act as a source of sizable tax revenue once industry reaches a level of maturity,” the SECP has added.

The private equity capital is invested in a company or other entity that is not publicly listed or traded, while the venture capital is a funding given to startups. The growth of PE&VC is also expected to help the documentation of economy and broadening the tax network.

The other proposal by the SECP was extending tax credit to newly introduced portfolio investment product of Exchange Traded Funds (ETFs).

The ETFs are the funds for low-cost investments and important for providing a low-cost investment option for local as well as foreign investor thereby expanding Pakistan’s capital market, the SECP has said that the tax credit available to mutual investments have to be specifically extended to ETFs, as this not specifically covered due to new product.

The SECP has suggested that the tax rate for ETF should be equal to that for the mutual funds.

The corporate sector regulator has demanded the FBR to support the regulated commodity market for trading of electronic warehouse receipts by exempting physical settlement of commodity futures contracts.

The objective of the proposal was to transform agricultural landscape, promote financial inclusion, improve storage and handling standards to reduce post-harvest losses of farmers in line with government’s vision.

It will help develop an ecosystem for storing, preserving, trading and providing ease in financing of a range of agricultural commodities through introduction of Electronic Warehouse Receipt.

Published in Dawn, June 10th, 2021