KARACHI: Finance Minister Dr Abdul Hafeez Shaikh on Saturday agreed to the proposals of SECP for increasing trade volumes at Karachi Stock Exchange (KSE), removing the withholding tax on brokers' commission and freezing current rate of Capital Gain Tax (CGT) till June 2014.
Addressing KSE members, he said that CGT was an important tax which was imposed on short term gains despite its opposition from KSE members. "This tax will be remembered in the history as it was imposed with honesty and simplicity to ensure that it should not become the source of harassment for investors and trading volumes should not fall. It was imposed with the joint efforts of KSE, SECP and FBR", he recalled.
"I accept these proposals of Security and Exchange Commission of Pakistan (SECP)", he said amid thunder of applause from KSE members and added that these should be operationalised by April 1, 2012.
The minister told brokers that they will find him (the Minister) as their resource person and as assistant in helping out in the problems facing them.
"However, you should also help the government so that it can take care of less privileged and neglected segment of the society", he added.
Referring to the proposal of SECP for the development of capital market, Dr Hafeez said that he will fully support it because it will help in the expansion of this market.
He also suggested KSE to focus of the education of investors about capital market and protection of investors.
Earlier, talking of country's economy, he said that during the last six months, tax collection grew by 27 percent to Rs 840 billion over the same period last year.
He said the GDP growth is expected to the around 4 percent in the current fiscal year based on the improved performance by agriculture sector and industry in the last six months.
"For the first time in the last 24 months, inflation has fallen to single digit (9.6 percent) after reaching as high as 25 percent. This has become possible due to stringent austerity drive of the government and tight monetary policy", he noted.
He said government has spent only 45 percent of the allocated portion of its spending during the six months to curtail inflation in the country.
Expressing his disappointment over the low tax-to-GDP-ratio of 9 percent, he said it was the lowest in the world and added that wealthy people have a habit of not paying tax while the government is also not in a habit to collect tax.
He noted that country's exports were growing at 4 percent while remittances were averaging at $ 1 billion per month.
Dr Hafeez said that though the economic situation was not comfortable, it was manageable. You should not be worried about the economy.
Referring to current energy crisis, he said this can be a problem area in future.
He pointed out that the government has the resources to pay $ 1.2 billion to IMF this year and it was incorporated in the budget. So don't worry, the money is there", he added.
Earlier, Chairman SECP Muhammad Ali in his speech said that the burden of CGT had pulled down the market capitalization of KSE from %$ 75 billion to $ 33 billion, thus wiping out $ 42 billion from the market.
He said the government alone had sustained an income loss of $ 12 billion as state-owned scrips are 30 percent of the total market. Imposing of CGT had affected investors' confidence and brokers' capacity to do business and created liquidity crunch in the market, he added.
He gave proposals for enhancing trade volumes in the market and urged the minister to approve these proposals.
Referring to SECP's efforts to promote growth in the capital market, Ali said that margin financing rules have been amended allowing individual investors to take advantage of margin financing.
Managing director KSE Nadeem Naqvi and chairman KSE Zafar Ahmed also spoke on the occasion.
Copyright APP (Associated Press of Pakistan), 2012
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