KARACHI, July 24: The Central Board of Revenue has warned stock brokers to refrain from the practice of transferring presumptive tax liability to their clients.

In a meeting recently held with the board of directors of the Karachi Stock Exchange, M.S. Lal, CBR member (tax policy and reforms), raised this point and suggested that this practice should be stopped immediately.

He said the CBR had been receiving complaints from investors that the brokers seemed to be passing on the burden of presumptive tax payable by them on the commission to their clients either by enhancing the rate of commission or through collecting service charges.

KSE general manager Muhammad Yacoob Memon in a notice addressed to the members has pointed out that this practice is against the spirit of the income tax law and is not desirable since the payment of presumptive tax is the personal and exclusive liability of KSE members or brokers earning commission on sale and purchase of shares.

Similar complaints have also been received by the KSE from the Securities Exchange Commission of Pakistan.

As per the relevant circular issued by the CBR, Mr Memon said only CVT and withholding tax on sale of shares was to be passed on to the clients.

The KSE has been advised that in case of failure to comply with this procedure, the tax authorities will be constrained to treat such income of the brokers subject to normal taxes.

The KSE general manager asked members of the exchange to immediately stop this process.