KARACHI, June 24: The Board of Directors of the Karachi Stock Exchange (KSE) has welcomed various budgetary proposals including the finalisation and approval of takeover law, but identified a few other measures that the government might consider for the development of capital markets.

A KSE press release stated that the board, which met on Saturday to review Budget 2002-03, appreciated the decision of the government about withdrawals of tax on bonus shares and the reduction of withholding tax from 10 to 5 per cent on brokerage and commission received by the stock brokers. Similarly, the decision about extension of the scope of withholding tax exemption to Investment Companies registered under the Investment Companies and Investment Advisors Rules, 1971 or Unit Trust Schemes constituted by Asset Management Companies. The board said, it would help in development of Mutual Fund industry.

The progressive reduction of tax rates for banking companies by 3 per cent would encourage investment and promote capital formation. But the reduction of tax for private companies by 2 per cent for the next five years, would place them at par in tax treatment with listed companies and would discourage listing at the stock exchanges, the board observed. It asked for similar tax reductions in case of listed companies.

The board, however, requested the government to restore tax exemption status of the stock exchanges, especially in the context of tax levied on Investors’ Protection Fund and Clearing House Protection Fund, besides allowing one time exemption on capital gains on transfer of membership rights in order to encourage professionalization of brokerage houses for better exposure and services.

The KSE press statement stated that the Board also asked the government to review its decision about the withdrawal of income tax exemption in respect of income arising out of listed TFCs issued by the corporate sector for assessees other than a company.