ISLAMABAD: The PSX Stockbrokers Association has proposed some policy measures to the Federal Board of Revenue (FBR) to rationalise tax rates on stock market transactions including Capital Gains Tax (CGT) on the trading of shares in the next budget for 2021-22.
Sources told Business Recorder Saturday that a delegation of the association has recently presented their set of proposals to the FBR, asking rationalisation in the rate of CGT on the trading of shares.
The delegation of the stock brokers association also held a separate meeting with the Securities and Exchange Commission of Pakistan (SECP) to discuss the new anti-money laundering regime, and they stressed that know your customer (KYC) regime was a duplication of work, because it was already done by the banking sector.
The association has requested the SECP to ease the stringent regulations in this regard for the capital markets.
The FBR officials of Inland Revenue Policy informed the brokers association that the FBR has already constituted a consultative committee on capital market tax reforms to review the tax policies and suggest measures for the development of the capital market and amendments in the tax laws.
The committee will review and implement all measures that impinge upon the capital markets and its stakeholders.
The proposals shall be categorised into immediate, medium-term and long-term reforms and shall accordingly be prioritised, the FBR added.
During meeting with the FBR, the other key demand of the stock brokers was that the CGT should be used as tool to incentivise investments in the bourse, and suggested the CGT rates should be reverted to the pre-2016 level.
Earlier the CGT was 15 percent, if the shares were sold within one year of purchase, 10 percent, if sold within two years, five percent, if within three years, and the CGT should be abolished, if the holding period was more than three years.
The brokers maintained that the rate incentives would promote the practice of saving in securities.
The association has also highlighted that the withholding tax was 12 percent at transactions in the Pakistan Mercantile Exchange and the Pakistan Stock Exchange for the institutions, whereas the same was three percent for the individuals.
The stock brokers have demanded the FBR to reduce the withholding tax for the institutions as well in the forthcoming budget.
The other issue raised by the association was related to a decision by a court, when it was declared when the definition of the word “security” was changed and the brokers have asked the FBR to streamline the complicated matter. The association has also requested the FBR to notify the decision of the government made in the federal budget 2020-21, allowing the brokers to carry forward the losses for the next three years.
The brokers have said that the facility to carry forward the losses was available to them but it has been highlighted that without the notification there were fears that the FBR could start charging CGT from them.
Copyright Business Recorder, 2021