The stock market is a place to raise funds and the government should cash this avenue by allowing complete exemption of capital gain tax (CGT) on trading of securities, market players said. The exemption in CGT will encourage foreigners to invest in Pakistan, Adil Ghaffar, General Secretary of PSX Stockbrokers Association said. In lieu of CGT, Pakistan will be able to get benefits like increase in forex reserves; interest free; and no effect of devaluation.
He said stock market is considered to be the most regulated and documented avenue where almost 95 percent of the monies received are through banking system. In the presence of existing Know your Customer (KYC) and different rules and regulations, including but not limited to, Anti-Money Laundering (AML), it would be unjustified if Government of Pakistan does not take advantage of this fabulous avenue to raise funds. Furthermore, the state of the art electronic share transfer system, make it fully traceable.
He was of the view that being regulated and fully documented, in fact, Government of Pakistan should use this avenue to broaden its tax net. "We need to attract people towards documentation of economy and thereafter, FBR should play its vital role in bringing people to tax net", he added.
He said that the exemption of CGT on investments in stock market has nothing to do with tax on real estate or other assets class, such as, National Saving Schemes, Prize Bonds, etc. He said CGT on stock market transactions should be completely abolished.
When compared with fixed income saving schemes, be it National Saving Scheme or Prize Bonds, where withholding tax is being deducted, this class of asset investment, i.e. investments in stock market, generates business activity along with employment creation. Whereas, under fixed saving schemes, GoP is the only beneficiary and utilise these for its own use. Furthermore, fixed income saving schemes are also bearer and therefore failed to attract documentation of economy. Hence this asset class is different from the saving schemes.