ISLAMABAD : The exemption of capital gains tax on stock exchanges would continue up to June 30, 2010, as per the provisions of the Income Tax Ordinance 2001. FBR officials told Business Recorder on Monday that the Federal Board of Revenue (FBR) would not touch this exemption in the coming budget under clause-110 of Part-I of the Second Schedule of the Income Tax Ordinance 2001.
Sources said that the Advisor to Prime Minister on Finance referred to taxing agriculture, real estate, services and stock market, but in a phased manner. The government would gradually bring four important sectors, including agriculture, services, real estate and stocks, under the tax net.
However, the government has not given any indication of the possibility of withdrawing capital gains tax exemption in the coming budget. Therefore, this exemption is expected to continue, as specified in the Second Schedule of Income Tax Ordinance. The four key sectors--agriculture, real estate, services and stock market--would be brought into the tax net in a systematic manner, sources added.
According to 2009-10 budget proposal, drafted by the Securities and Exchange Commission of Pakistan (SECP), the exemption given on deduction of tax on capital gains will expire on June 30, 2010, and tax will be applicable from July 1, 2010. As recommended last year, the SECP is in favour of imposition of capital gain tax.
However, for smooth implementation of this tax, the imposition of capital gain tax from 2010-11 should be announced this year so that this is known to the market well in time, and the market is prepared for it. An appropriate infrastructure for calculation of tax on income arrived from capital gains will be required.
The rates of capital gain tax might vary. It might be lower for persons/investors who hold shares for long term as compared to day traders. It is further suggested that once the capital gain tax is imposed, the capital value tax (CVT) on purchase of shares should be completely abolished, the SECP budget proposal added.
It is worth mentioning that there was a proposal to withdraw the capital gains tax exemption in the current year's budget (2008-09) but stock exchanges and other stakeholders, citing the possibility of a market crash, proposed extension of the exemption for a certain period; a proposal that they presented to the then PPP Co-Chairman Asif Ali Zardari who granted the request for two years.
The reason, analysts argue, was to ensure that investment was not compromised and stock markets strengthened. Therefore, the exemption was extended for a period of two years ie up to June 30, 2010, except for the banking companies where capital gains would continue to be taxed as per the provisions of the Seventh Schedule of the Income Tax Ordinance 2001.
Copyright Business Recorder, 2009
|
Print Version 
Send This Story 
