The CVT faux pas

The official move to impose a 0.1 per cent capital value tax (CVT) on the purchase of shares has come as a shock to the stock markets and provoked a fairly violent reaction on Monday.

Trading volumes and prices tumbled on the first trading day after the new budget. The KSE-100 index plunged by 166.91 points, wiping out Rs44 billion from market capitalization in a single day.

Many traders and stock brokers say the CVT was a bolt from the blue. Aware of the impact that the issue would have on the market, stock exchange representatives met the federal finance minister and the Central Board of Revenue officials on Sunday night to press for a review and withdrawal of the proposal.

The CVT was opposed in principle as well as for its high rate. As a result of these deliberations, a five-member committee comprising officials of the CBR, Security Exchange Commission of Pakistan and three stock exchanges was formed to look at various options that would be acceptable to both sides.

One of them is said to be doubling of the withholding tax on brokers from five to 10 per cent in lieu of withdrawal of CVT. The basic question for the committee is how the government can raise the anticipated tax revenue and work out the mechanism for it if it forgoes CVT on the bourses' demand or reduces its rate.

The revenue target would also be a contentious issue. Since the finance minister appears to enjoy the confidence of the market, it should not be difficult for the two sides to arrive at some compromise and agreement.

The official announcement about continuing support to the government has calmed nerves and, coupled with institutional buying, the market had recovered somewhat on Tuesday from the shock.

Though officials might describe the move to tax big money being made in the booming market as being justified in view of the increasing public sector spending on social and infrastructural development, the mode of taxation remains questionable.

It is argued that CVT on purchase of shares is a tax on investment and not on profit and does not qualify for a levy as a matter of principle, more so as it comes with a budgetary fiscal stimulus promising investment and growth.

While the Karachi Stock Exchange has rejected the CVT, it has, along with the Lahore and Islamabad bourses, offered to look at various options and mechanisms that would help the government realize the revenue targets.

The bourses expect the committee to submit its recommendations in a week's time, but the budgetary proposals are now before parliament and must get its approval.

Such faux pas vitiates the investment climate that could be avoided by closer consultations with trade representatives on a broad range of tax proposals, one of which could be picked up to achieve the desired fiscal target.

In developed markets, budget proposals are announced much in advance to facilitate a national debate, to examine their implications in depth and not to rock the market.

Though the budget contours, particularly about governmental spending and fiscal stimulus, were made public before June 12 through official leakages, a step like CVT was kept secret because of its sensitivity.

But it did not help as is evident from the strong reaction from the stock markets and the government's decision to review it. The exercise should have been done before the announcement of the budget.

Bhasha or Kalabagh?

It is a measure of divisive politics in the country that the nation has failed to develop a consensus on the Kalabagh dam. The Tarbela dam's storage capacity has seriously depleted as a result of silting, while a de-silting operation would cost a fortune.

The continued sedimentation will not only further erode its storage capacity, it will also affect power generation. This means that if another dam is not built, the country's fast-growing requirements for power and irrigation will largely remain unmet.

This leaves Pakistan with no choice but to opt for another big reservoir. It is against this background that one must take notice of Senator Nisar Memon's statement on the issue.

At a press conference on Monday, the chairman of the parliamentary committee on water resources revealed that foreign experts thought the $6.5 billion Bhasha dam was the best option for technological reasons and in terms of human displacement. However, the Kalabagh dam was still preferable "for other reasons".

There is no doubt that the relative merits of the two dams can only be determined by experts in hydraulic engineering. But the issue here is politics. Whatever the experts finally settle for, ultimately the four provinces must give their consent to the project.

Here one must keep one's fingers crossed. A consensus is nowhere in sight. Agriculturists in Sindh especially feel threatened by another dam up in the north. Similar fears are raised by farmers in the NWFP and Balochistan.

Unfortunately, the supporters and opponents of a new dam have given the issue a political twist. What the opponents of the dam have failed to do is to make their case on the basis of cold statistics and technological demerits, while the supporters of the project have not cared to remove the fears and misgivings of the opponents.

It is time all sides realized the need for a consensus on the issue and looked at it from an objective angle. The yardstick should be - does it serve the country's future needs in the power and water sector without hurting regional interests?

Doctor-patient equation

A Survey in the NWFP, Balochistan and Punjab has brought out some very disturbing information about the patient-doctor relationship. According to the survey, doctors generally spend a mere two minutes with their patients.

Given that many of the patients have to spend considerable time and money to travel long distances to obtain the needed medical advice, the two-minute average seems shocking.

In developed countries, like Britain for instance, the survey says, on an average doctors spend 15 minutes with a given patient. One wonders what kind of advice or treatment can be provided to a patient in the course of mere two minutes' attention to their problems.

This is reflective of the sorry state of the health-care system in Pakistan and of the fact that many doctors see their profession basically as a means to make good money and not as a service to the suffering humanity.

Good doctors spend several minutes listening to their patients and reading their case histories to get a correct understanding of the problem at hand. It would be safe to assume that the survey in question proves that by and large most doctors are not fulfilling this basic obligations of their profession.

The aim seems to be to see as many patients as possible within a given time to maximize earnings. Some might say that this is merely a reflection of increasing commercialization in the rest of society, so why single out doctors? However, they miss the point that the quality of treatment and patient care are compromised when doctors act this way.

The Pakistan Medical Association should not allow this to go on unchecked. What it must do is to impress upon its members not to act in violation of the norms and principles of their profession in the matter of patient care.