Giving with one hand, taking with the other
KARACHI: Investors in stocks were not exactly jumping with joy on the conclusion of the budget speech by the finance minister on Friday evening. Some prudent market participants said that they needed time for the measures announced to sink in.
But from the first hearing the government did seem to have set aside most of the budget proposals presented by the Pakistan Stock Exchange (PSX). The three principal measures included the rationalisation of period of holdings for levy of Capital Gains Tax (CGT); waiver of tax on dividend in the hands of the shareholders and to abolish tax on bonus shares.
The budget, in contrast has, however decreed increase of tax on dividend to 15 per cent from 12.5pc while ignoring the issue of tax on bonus shares.
Arif Habib, former chairman of KSE (now PSX) commented that for the capital market the budget proposals were not entirely negative or positive, but a mixture of both. “While the government had provided certain incentives for the growth of the market, those were also diluted by some other measures that were less than encouraging”.
He elaborated that the reduction in corporate tax rate by 1pc for non-banking companies to 30pc from 31pc, though on course, was nonetheless encouraging. “However, the equalisation of borrowings by the government with the amount of PSDP—Rs1,001bn—appears to give a sense that it would be applied for development and none of it for current expenditure,” he said.