LAHORE: Security Exchange Commission of Pakistan (SECP) Chairman Muhammad Ali on Monday stressed the need for facilitating corporatization, as currently taxation regime was in favour of non-corporate entities that pay 10 percent income tax than corporate sector.
In a meeting with economic reporters arranged by Lahore Economic Journalist Association (LEJA) here, he said that sole proprietors of firms and partnership concerns were taxed at 25 percent and they were exempt from audit, while listed companies pay 35 percent income tax on their income but subject to stringent audits by the regulators, while, it was other way round in developed world.
The SECP Chairman said, Pakistan had done yet a lot for development of corporate sector, citing that UK with less than half Pakistan's population had two million registered companies with 300,000 new companies being registered every year.
"In Pakistan there are only 61,000 registered companies against three million businesses as per State Bank of Pakistan statistics, and only two percent of the businesses are corporatized in Pakistan," he maintained.
Demutualization has been achieved in Pakistan's capital market, he said and asserted that former brokers currently had 40 percent share in the demutualized exchange, while 60 percent shares were with the government. He, however, conceded that it would take 12-18 months when former owners of the stock market would lose their grip on the market, citing that 40 percent of these shares would be sold to a strategic investor (some reputed global stock exchange) and 20 percent would be offloaded to the general public.
The prices in Pakistan Capital Market, he said, were still very low and the 40 percent shares to strategic investors would be easily sold.
Regarding capital gain tax, the SECP Chairman said that during 1972-2010, there was no capital gain tax on capital market, and whatever capital gains the investors accrued during this period were legal and tax free. After 2008 capital gains slumped globally but investors were supported by their governments and they recovered, he observed.
To a query, Ali said the Takaful the Islamic Insurance was up till now was done by the registered takaful companies only, and new rules allow the conventional insurance companies to open a takaful window in their operations. He said the regular takaful companies had got stay order from the courts, but hoped that after the vacation of stay order, this window would become operative.
Earlier all listed companies were required to maintain functional websites for shareholder facilitation, he said and added that now all private companies above paid up capital of Rs 200 million would have to maintain a website to provide some information to the small shareholders.
To a question, he said the SECP ranking improved from 70 out of 150 countries in 2011-12 to 55 in 2012-13 in World Economic Forum Global Competitiveness Report. "This is a great achievement as first 40 capital market regulators are from developed economies," he mentioned.
At the end, the LEJA President Fakhir Malik thanked the SECP chairman on the valuable information that he decimated.
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