Revision of CGT regime for stock market: Cannot legalise black money through revision: SECP
ISLAMABAD: Revision in capital gains tax (CGT) regime for the country’s stock market cannot be used for whitening illegal money as only the legal money made during CGT exemption period of the last 36 years would be facilitated to be brought into the stock market till 2014.
Securities and Exchange Commission of Pakistan (SECP) Chairman Muhammad Ali stated this on Wednesday.
During a media briefing, the SECP chairman informed that billions of rupees made during these 36 years from the stock market were legal, however, these have not been documented and the new CGT regime would help document them for the first time.
During finalising the revision in CGT regime major concerns have been addressed. Although investors would be exempted from explaining source of investment under Section 111 of the Income Tax Ordinance, 2001, the provisions of the laws of the National Accountability Bureau, Anti-Narcotics Force, Federal Investigation Agency and other national institutions would continue to apply regarding the source of investment.
Revision in CGT regime has been fully endorsed by the Federal Board of Revenue (FBR) as it has been finalised in consultation with its top officials and it would help in documentation of money invested in the stock market, help stop tax avoidance and tax evasion and capital formation for the businesses.
Three major concerns have been highlighted in the media after the announcement of the proposed revision in CGT regime for the stock market that illegal money would come into the stock market, people would use this revision for whitening of their illegal money and not asking source of investment would also lead to illegal money coming into the market.
The SECP chairman informed that measures that have been taken to address these issues are that there will be complete due diligence of investors and last week SECP has tightened its procedures in this regard. He ruled out any chance of misuse of this scheme for whitening of illegal money through revised CGT regime and said that minimum holding period which could be three to six months period would address these issues and there would more risk in minimum holding period for investors in investing in the stock market than investment in other instruments available in the country for whitening of illegal money.
He said that in other available instruments for whitening of illegal money investors could pay 2 percent only for whitening of their money and while investing in stock market prices of stocks could come down to 5 percent to 10 percent and there would be a greater risk for them that would result in their staying away from investing in the stock market. If, a person comes and makes investment in the market and the next day he sells his stocks and walks out of the market, the holding period of stocks would stop such kind of investors from coming to the stock market, he explained.
He further explained that when Central Depository Company account would be opened and all the bank requirements would apply on such an account, and there is no logic in fearing that illegal money would come into the stock market. He also dispelled the impression that revision in CGT regime would negate any proposal of Financial Action Task Force (FATF) of the Anti-Money Laundering, and said that as a safeguard measure, all the proposals of FATF have been made part of the revised scheme.
The SECP chairman explained the revised CGT regime and informed that all transactions recorded by the National Clearing Agency (NCA) would help stop tax evasion and tax avoidance. CGT would be applicable on profit only as against the earlier practice of profit and loss both. There is proposal to freeze the CGT rate of 10 percent on the holding period of up to six months and 8 percent CGT on period less than a year till 2014 to help investors bring in their investment from other sectors back to the stock market. He said that before imposition of CGT, tax collection from stock market was Rs 5 billion that has came down to Rs 400 million. Revision in CGT regime would help bring in huge investment back to the stock market and this would help document the wealth, broaden the tax base and increase the tax proceeds. There is no need to get approval of the parliament for revision in CGT regime and the FBR has the authority to revise it, however, there might be a need to promulgate Presidential Ordinance for declaring NCA as a withholding agent.
The major target that would be achieved through this revision in CGT regime is to revive the stock market, and help businesses to arrange capital required for their growth. At some time average turnover of the stock market was recorded at $300 million that has declined to just $30 million these days and there is an effort to get it back to its earlier turnover level. Some 500 million shares were traded at the stock market at the time when the market was performing well and now these volumes have declined to 150 million shares, SECP wants to bring the volume back to 500 million shares or even higher and this would result in higher tax collection from the stock market.
The SECP chairman informed that NCA would record the profit-making transactions and collect due tax from them and would issue certificate to investors to file such certificates along with their annual income tax returns.
He categorically informed that declaring NCA as a withholding agent for collection of CGT has been finalised in consultation with the FBR and it has full support of FBR officials.
He said that imposing minimum tax on the money earned from other sectors and being invested in the stock market would drive the investors away, he added. He also said that placing any kind of cap on such kind of investment in stock market would be against the spirit of the stock market. Explaining the reason for introducing revised CGT regime from April 1, 2012, he informed that SECP, FBR and NCA have to revise their rules and regulations and these could be revised and implemented during a transition period of last three months of the ongoing fiscal year 2011-12
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1
Securities Update On Capital Gains Tax
Started by Amin Khan, Jan 23 2012 10:02 AM
capital gains tax CGT gains capital tax property
58 replies to this topic
#20
Posted 09 February 2012 - 12:37 PM
Revision of CGT regime for stock market: Cannot legalize black money through revision: SECP
Revision in capital gains tax (CGT) regime for the country’s stock market cannot be used for whitening illegal money as only the legal money made during CGT exemption period of the last 36 years would be facilitated to be brought into the stock market till 2014.Securities and Exchange Commission of Pakistan (SECP) Chairman stated this on Wednesday. During finalizing the revision in CGT regime major concerns have been addressed. Although investors would be exempted from explaining source of investment under Section 111 of the Income Tax Ordinance, 2001, the provisions of the laws of the National Accountability Bureau, Anti‐Narcotics Force, Federal Investigation Agency and other national institutions would continue to apply regarding the source of investment. He said that in other
available instruments for whitening of illegal money investors could pay 2 % only for whitening of their money and while investing in stock market prices of stocks could come down to 5% to 10 % and there would be a greater risk for them that would result in their staying away from investing in the stock market. If, a person comes and makes investment in the market and the next day he sells his stocks and walks out of the market, the holding period of stocks would stop such kind of investors from coming to the stock market, he explained. The SECP chairman explained the revised CGT regime and informed that all transactions recorded by the National Clearing Agency (NCA) would help stop tax evasion and tax avoidance. CGT would be applicable on profit only as against the earlier practice of profit and loss both. There is proposal to freeze the CGT rate of 10 % on the holding period of up to six months and 8 % CGT on period less than a year till 2014 to help investors bring in their investment from other sectors back to the stock market. He said that before imposition of CGT, tax collection from stock market was Rs 5 bn that has came down to Rs 400 mn. Revision in CGT regime would help bring in huge investment back to the stock market and this would help document the wealth, broaden the tax base and increase the tax proceeds. There is no need to get approval of the parliament for revision in CGT regime and the FBR has the authority to revise it, however, there might be a need to promulgate Presidential Ordinance for declaring NCA as a withholding agent. The major target that
would be achieved through this revision in CGT regime is to revive the stock market, and help businesses to arrange capital required for their growth. At some time average turnover of the stock market was recorded at $300 mn that has declined to just $30 mn these days and there is an effort to get it back to its earlier turnover level. Some 500 mn shares were traded at the stock market at the time when the market was performing well and now these volumes have declined to 150 mn shares, SECP wants to bring the volume back to 500 mn shares or even higher and this would result in higher tax collection from the stock market. he added. He also said that placing any kind of cap on such kind of investment in stock market would be against the spirit of the stock market. Explaining the reason for introducing revised CGT regime from April 1, 2012, he informed that SECP, FBR and NCA have to revise their rules and regulations and these could be revised and implemented during a transition period of last three months of the ongoing fiscal year 2011‐12. (Daily Times)
Limiting budget deficit at 5.7% of GDP:
IMF suggests making another attempt to introduce RGST Also suggests to reintroduce SED, IT surcharge, raise GST rate, reduce subsidies on wheat, fertilizer The International Monetary Fund (IMF) has proposed the government to make another attempt to introduce reformed general sales tax (RGST) and reduce subsidies on wheat and fertilizer to limit budget deficit at 5.7 % of the gross domestic product (GDP). IMF’s proposal also suggested reintroducing special excise duty and income tax surcharge; and raises the general sales tax rate. The IMF has released a complete report on 2011 Article IV Consultation and Proposal for Post‐Programme Monitoring for Pakistan, which contains the fund’s prescription to limit the budget deficit. The staff proposed a set of measures to build buffers
and boost confidence, and cap the 2011‐12 deficit at 5.7 %of the GDP. At the same time, efforts should be made to minimize the electricity subsidies and keep provincial budgets in surplus.(Daily Times)
(SCS)
Revision in capital gains tax (CGT) regime for the country’s stock market cannot be used for whitening illegal money as only the legal money made during CGT exemption period of the last 36 years would be facilitated to be brought into the stock market till 2014.Securities and Exchange Commission of Pakistan (SECP) Chairman stated this on Wednesday. During finalizing the revision in CGT regime major concerns have been addressed. Although investors would be exempted from explaining source of investment under Section 111 of the Income Tax Ordinance, 2001, the provisions of the laws of the National Accountability Bureau, Anti‐Narcotics Force, Federal Investigation Agency and other national institutions would continue to apply regarding the source of investment. He said that in other
available instruments for whitening of illegal money investors could pay 2 % only for whitening of their money and while investing in stock market prices of stocks could come down to 5% to 10 % and there would be a greater risk for them that would result in their staying away from investing in the stock market. If, a person comes and makes investment in the market and the next day he sells his stocks and walks out of the market, the holding period of stocks would stop such kind of investors from coming to the stock market, he explained. The SECP chairman explained the revised CGT regime and informed that all transactions recorded by the National Clearing Agency (NCA) would help stop tax evasion and tax avoidance. CGT would be applicable on profit only as against the earlier practice of profit and loss both. There is proposal to freeze the CGT rate of 10 % on the holding period of up to six months and 8 % CGT on period less than a year till 2014 to help investors bring in their investment from other sectors back to the stock market. He said that before imposition of CGT, tax collection from stock market was Rs 5 bn that has came down to Rs 400 mn. Revision in CGT regime would help bring in huge investment back to the stock market and this would help document the wealth, broaden the tax base and increase the tax proceeds. There is no need to get approval of the parliament for revision in CGT regime and the FBR has the authority to revise it, however, there might be a need to promulgate Presidential Ordinance for declaring NCA as a withholding agent. The major target that
would be achieved through this revision in CGT regime is to revive the stock market, and help businesses to arrange capital required for their growth. At some time average turnover of the stock market was recorded at $300 mn that has declined to just $30 mn these days and there is an effort to get it back to its earlier turnover level. Some 500 mn shares were traded at the stock market at the time when the market was performing well and now these volumes have declined to 150 mn shares, SECP wants to bring the volume back to 500 mn shares or even higher and this would result in higher tax collection from the stock market. he added. He also said that placing any kind of cap on such kind of investment in stock market would be against the spirit of the stock market. Explaining the reason for introducing revised CGT regime from April 1, 2012, he informed that SECP, FBR and NCA have to revise their rules and regulations and these could be revised and implemented during a transition period of last three months of the ongoing fiscal year 2011‐12. (Daily Times)
Limiting budget deficit at 5.7% of GDP:
IMF suggests making another attempt to introduce RGST Also suggests to reintroduce SED, IT surcharge, raise GST rate, reduce subsidies on wheat, fertilizer The International Monetary Fund (IMF) has proposed the government to make another attempt to introduce reformed general sales tax (RGST) and reduce subsidies on wheat and fertilizer to limit budget deficit at 5.7 % of the gross domestic product (GDP). IMF’s proposal also suggested reintroducing special excise duty and income tax surcharge; and raises the general sales tax rate. The IMF has released a complete report on 2011 Article IV Consultation and Proposal for Post‐Programme Monitoring for Pakistan, which contains the fund’s prescription to limit the budget deficit. The staff proposed a set of measures to build buffers
and boost confidence, and cap the 2011‐12 deficit at 5.7 %of the GDP. At the same time, efforts should be made to minimize the electricity subsidies and keep provincial budgets in surplus.(Daily Times)
(SCS)
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#21
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Posted 10 February 2012 - 10:25 AM
The FBR to convey its strong reservations over the proposed regime of CGT to the Ministry of Finance
The FBR will convey its strong reservations over the proposed regime of CGT to the Ministry of Finance on two key issues: a) exemption from section III (unexplained income or assets) of the Income Tax Ordinance 2001 to investment made in stock market upto Jun 30,’14 and 2) declaring NCCPL as a withholding agent to deduct and deposit CGT from investors.
The FBR will convey its strong reservations over the proposed regime of CGT to the Ministry of Finance on two key issues: a) exemption from section III (unexplained income or assets) of the Income Tax Ordinance 2001 to investment made in stock market upto Jun 30,’14 and 2) declaring NCCPL as a withholding agent to deduct and deposit CGT from investors.
Regards
Imran Mughal
#22
Posted 12 February 2012 - 06:06 PM
PPP senate candidates shortlisted
KARACHI, Feb 11: While the Pakistan People’s Party is set to retain seasoned politician Mian Raza Rabbani for another six-year term in the Senate from Sindh, it is going to drop Abdul Hafiz Shaikh, the current finance adviser to the prime minister, and Dr Safdar Abbasi from the upper house, it emerged on Saturday.
Some 200 men and women had applied for a party ticket for the upcoming senate election from Sindh and a PPP board had considered their applications.
There are 12 senate seats from Sindh and members of the Sindh Assembly will elect seven members against as many general seats, two members against as many seats reserved for technocrats and women and one member against a reserved seat for the minorities.
Although no official list of candidates from Sindh has so far been issued by the PPP, sources said that Raza Rabbani, Saeed Ghani, a former general secretary of the PPP’s Karachi division, Aijaz Dhamra, the president of the Sindh People’s Youth, Panah Odho, the PPP’s Jacobabad president, and Sindh Chief Minister’s Adviser Rashid Rabbani are being tipped as strong candidates for the five general seats of the senate.
The sources said that the PPP was planning to field its candidates on one technocrat, two women and one minority seats of the senate from Sindh and Dr Karim Khawaja, Sehar Karim, Shahida Rehmani and Hari Ram were among the shortlisted candidates.
Although it was not immediately clear if Senator Hafiz Shaikh and Dr Safdar Abbasi had applied for party tickets, the sources said that the PPP was not interested in retaining them in the upper house. Even Taj Haider, the PPP’s Sindh chapter’s secretary general, was not considered for a party ticket, they added.
Some big names are also in circulation, but it is not yet clear whether the PPP would award them tickets.
The sources said that of the total 12 seats from Sindh, the PPP was working out a strategy to get at least eight seats — five general, one technocrat, two women and one minorities — but in case it was put in a difficult situation by the Muttahida Qaumi Movement or any other coalition partner, it might give up its claim to one of the two women seats.
According to the schedule notified by the Election Commission of Pakistan, scrutiny of nomination papers will be held on Feb 16 and Feb 17, while polling will be held on March 2.
KARACHI, Feb 11: While the Pakistan People’s Party is set to retain seasoned politician Mian Raza Rabbani for another six-year term in the Senate from Sindh, it is going to drop Abdul Hafiz Shaikh, the current finance adviser to the prime minister, and Dr Safdar Abbasi from the upper house, it emerged on Saturday.
Some 200 men and women had applied for a party ticket for the upcoming senate election from Sindh and a PPP board had considered their applications.
There are 12 senate seats from Sindh and members of the Sindh Assembly will elect seven members against as many general seats, two members against as many seats reserved for technocrats and women and one member against a reserved seat for the minorities.
Although no official list of candidates from Sindh has so far been issued by the PPP, sources said that Raza Rabbani, Saeed Ghani, a former general secretary of the PPP’s Karachi division, Aijaz Dhamra, the president of the Sindh People’s Youth, Panah Odho, the PPP’s Jacobabad president, and Sindh Chief Minister’s Adviser Rashid Rabbani are being tipped as strong candidates for the five general seats of the senate.
The sources said that the PPP was planning to field its candidates on one technocrat, two women and one minority seats of the senate from Sindh and Dr Karim Khawaja, Sehar Karim, Shahida Rehmani and Hari Ram were among the shortlisted candidates.
Although it was not immediately clear if Senator Hafiz Shaikh and Dr Safdar Abbasi had applied for party tickets, the sources said that the PPP was not interested in retaining them in the upper house. Even Taj Haider, the PPP’s Sindh chapter’s secretary general, was not considered for a party ticket, they added.
Some big names are also in circulation, but it is not yet clear whether the PPP would award them tickets.
The sources said that of the total 12 seats from Sindh, the PPP was working out a strategy to get at least eight seats — five general, one technocrat, two women and one minorities — but in case it was put in a difficult situation by the Muttahida Qaumi Movement or any other coalition partner, it might give up its claim to one of the two women seats.
According to the schedule notified by the Election Commission of Pakistan, scrutiny of nomination papers will be held on Feb 16 and Feb 17, while polling will be held on March 2.
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#23
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Posted 15 February 2012 - 02:18 PM
NCCPL’s system vital for computing CGT
KARACHI: A senior official of the Federal Board of Revenue (FBR) visited the National Clearing Company of Pakistan Limited (NCCPL) to study NCCPL’s systems and mechanism being deployed for computing and deducting the capital gains tax (CGT). The visit has been a consequent step to the Finance Minister’s approval to the SECP proposal on revamping CGT that was submitted to the FBR last month.
During the presentation, NCCL briefed FBR on it’s IT-intensive set-up that will allow system based computation of CGT without human involvement. Under the proposed mechanism, the NCCPL will compute and deduct CGT for every investor by constructing an inventory portfolio based on its unique identification number. Both market-based transactions executed through stock exchanges and the Central Depository System will be used for computation of CGT liability in accordance with the Income Tax Ordinance and Rules. The NCCPL will forward to FBR its proposal in relation to required regulatory amendments to give effect to the overall CGT scheme.
In terms of the proposal to provide ease of calculation and documentation to individual investors, the NCCPL will act as a withholding agent to deduct and deposit the CGT from investors’ transactions. staff report
KARACHI: A senior official of the Federal Board of Revenue (FBR) visited the National Clearing Company of Pakistan Limited (NCCPL) to study NCCPL’s systems and mechanism being deployed for computing and deducting the capital gains tax (CGT). The visit has been a consequent step to the Finance Minister’s approval to the SECP proposal on revamping CGT that was submitted to the FBR last month.
During the presentation, NCCL briefed FBR on it’s IT-intensive set-up that will allow system based computation of CGT without human involvement. Under the proposed mechanism, the NCCPL will compute and deduct CGT for every investor by constructing an inventory portfolio based on its unique identification number. Both market-based transactions executed through stock exchanges and the Central Depository System will be used for computation of CGT liability in accordance with the Income Tax Ordinance and Rules. The NCCPL will forward to FBR its proposal in relation to required regulatory amendments to give effect to the overall CGT scheme.
In terms of the proposal to provide ease of calculation and documentation to individual investors, the NCCPL will act as a withholding agent to deduct and deposit the CGT from investors’ transactions. staff report
Regards
Imran Mughal
#24
Posted 23 February 2012 - 01:28 PM
Individuals Alive Again
- Benchmark KSE-100 index has rallied by 10% in CY12YTD thanks to much needed announcement of amending CGT filings rules addressing source of funding clause
- Individuals’ share in trading activity post announcement (on January 15, 2012) has increased exorbitantly to 60% from a low of 40% in Jun11
- This has also put to rest the speculation that government might not be able to honor the announcement
- Since participation by individuals have increased phenomenally, the activity in low priced stocks have increased drastically
- Though this activity is seemed to be driven by speculation, the turnaround stories primarily in cement companies and investment gains in holding companies are the fundamental factors behind current rally
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