The government has been requested by the Pakistan Stock Exchange (PSX) to reduce the corporate tax rate for companies listed on the stock exchange in the upcoming budget 2017-18. In its proposals, the PSX put forth the reasoning that the corporate tax rate being paid globally is 24pc in comparison to the 38pc being paid by organizations here, they said.
A PSX statement said “The high-tax regime has played a part in creating an undocumented economy, which is equivalent to the formal one at $300 billion or higher. “This would simultaneously help the government enhance the regulated economy, while also helping the national exchequer collect higher tax revenues from listed-and-documented firms.”
PSX has also suggested that the government should be collecting 5pc on the face value of bonus shares instead of the current 5pc it charges on market value of bonus shares. As per the PSX, this would result in revenue receipts of Rs2.5b for the government and in a bonus issuance of Rs50b. PSX said “The Finance Act, 2014 introduced 5pc tax on the value of bonus share. The levy instead of generating more revenue drastically reduced the issuance of bonus shares and earned very little revenue.”
In regards to Capital Gains tax, PSX has proposed reducing the maximum holding period of shares to a year only instead of the currently allowed five years. The stock exchange said “Short-term trading is generating about 70pc of the taxes on capital gains (of the total CGT collection).”They suggested that the government should collect maximum 10pc SGT on selling of shares between 6 to 12 months and 8pc on sale of shares within six months. PSX statement also said “CGT is not in line with the taxability on other asset class, for instance, there is no tax on gain on disposal of immovable property, if the holding period is three years or more.”
