KSE proposals for budget: KSE jobbers be allowed to file returns without source disclosure

The Karachi Stock Exchange (KSE) has proposed that jobbers should be allowed to file returns and should not be required to explain source of their assets, and all debt securities be exempted from capital gain tax (CGT). In its key proposals for the Budget for 2011-12, approved by the KSE board of directors in its meeting held on Monday and sent to Federal Board of Revenue (FBR), the KSE has said that the Jobbers, who provide the main liquidity through day-trading, have withdrawn from the market.
They are not averse to paying tax, but find the filing of returns and accounting for their wealth as a major issue. Over the last several decades, given the tax-exempt environment, they have not maintained formal accounts and have not filed returns. The KSE has proposed that those managing small portfolios (they are yet debating the definition of small but probably under Rs 10 million) be allowed to file returns, and not be required to explain source of their assets. Further, they be allowed to opt for a Final Tax regime against the withholding tax collected from them. All debt securities, issued by corporate as well as federal, provincial and local governments are traded on the automated exchange with undisclosed counter party, which allows proper price discovery be exempt from CGT.
The KSE's proposals for the upcoming budget also include: To introduce and promote ETFs, CGT should not apply to shares transferred to/from "authorised participants' (market makers) against issue/surrender of units of the ETF. Reduced tax on listed companies. The reduction be linked to free-float.
CVT on TFCs was inadvertently not removed last year. This needs to be removed. Inter-corporate dividends, received by listed companies, be exempt from tax. Tax credit (investment allowance) is currently allowed on investment in new issues on 10 percent of an individual's income with a cap of Rs 300,000 worth of investment. This investment has to be retained for one year. It has been recommended that the ceiling be raised to 25 percent and Rs 600,000, but with the condition of retaining the investment amount for three years. The specific investment may be sold but the proceeds must be reinvested in new issues or mutual funds.
CGT calculation for foreign investors (coming through SCRA) be calculated in foreign currency terms (the currency brought in). This is similar to what is done in India. CGT on corporatisation and demutualisation of exchange memberships be continued. This exemption was erroneously removed last year.