Regime change is often painful, especially when it comes with loosely arranged modalities that only increase apprehensions instead of appeasing them.
So, when FBR officials failed to convince the investor community on Saturday, a fall on Monday was but inevitable at Karachi Stock Exchange.
Broadly speaking, three major issues, amongst others, hovered on investors minds; the payment of advance tax on a quarterly basis by individual investors, the applicability of the new regime, and the revenue departments intention to inquire about the source of funding.
"The real issue is that of advance tax payment," Mohammad Sohail of Topline Securities argues, adding that it will create trouble for individual investors who contribute about 50~55 percent of daily trading volume.
And this view doesn seem like an exaggeration, given that the taxation department is perceived to be the eighth most corrupt government department, according to National Corruption Perception Survey 2010 published by Transparency International Pakistan.
So in a sense, investors concerns are justified, given that getting a tax refund, if need be, might require circumambulating the tax department and as a result wasting key entry time in the market.
Echoing Sohails view, Farid Alam, CEO of AKD Securities, says that treating investing business at par with other businesses is not justified.
"For 2010-11, the FBR is expecting to fetch Rs5 billion revenues under this head, which is not large enough to be divided into four installments, hence in the very first year of its imposition, expecting investors to pay advance tax is a bit too much from them, especially from the individual investors," wrote Alam in his opinion published in this newspaper on June 12.
But since FBR says that it will get back to KSE on this matter, there is little one can deliberate on it, except to expect the market to remain fragile until the time this issue is finalised, and hope that FBR comes up with a better investor-friendly mechanism.
While the collection issue may be resolved sooner or later, the row over the applicability of the new regime will likely keep the market jittery much longer than expected.
According to the MoU between the tax authorities and market men, the CGT was to be implemented on all purchases after July 1, 2010.
However, ambiguities have sprung up after the budget, with the Senates Committee on Finance adamant that the tax should be implemented on all transactions regardless of the date of purchase.
"There should be no confusion.......it is deemed to be like this," PML-N Senator Ishaq Dar told BR Research, citing that everywhere in the world capital gains tax is supposed to be applied in retrospective.
When asked that the markets reaction to this will be disastrous, Dar said that the government should not be blackmailed by the vested interests.
Given that the issue has now become political and also considering PML-Ns strong political clout, the row over applicability can be pernicious for the market.
Yet, some term this an overreaction.
"Net buyers in the last six months or so are mainly NIT or foreign funds; other local players haven made great capital gains as such because, save for OGDC, most other stocks are lower than what they were six months ago, or are nearly flat," Alam of AKD told BR Research.
"Older positions can be marked to market, and with some adjustments there shouldn be much of a problem", he added.
Still, even if things eventually go as smooth as some think, the real bone of contention is FBR plans to inquire about the source of income.
Sohail of Topline has downplayed the issue saying that "many money whitening schemes are available in Pakistan, so as such the source of earning isn a major issue". But others don agree.
A fund manager, speaking on the condition of anonymity, said the move will simply kill the market. "There will be no liquidity, as most individual investors have neither disclosed their income nor their broker account," he said, adding that you can confront the market.
"Ideally, this is a good move as it will increase documentation, but we don live in ideal conditions; why squeeze the most documented sector financial sector, why not go for farming tax instead," the fund manager argued.
But then again, if participants in the financial sector have a clean sheet, why should they be resisting against the notion to declare their source of funds.
Indeed, this is the biggest moral dilemma for the authorities; best left for those who have better command over the abstruse subject of business ethics.