KARACHI: The Pakistan Stock Exchange (PSX) has proposed the federal government to amend various tax structures assuring that by maintaining the long-term policy and accepting the PSX proposals in aggregate, the government will not have any negative impact on its revenue targets.
The PSX presented the proposals for federal budget 2016-17, suggesting that the Capital Gain Tax (CGT) rates should be decreased to 10 percent. The PSX further proposed that tax on bonus shares should be withdrawn and the CGT regime should be brought down to the original structure introduced in 2010, whereby tax was not payable on securities held for over 12 months, which had been agreed despite the fact that CGT is not charged in several regional countries. PSX proposed to omit the provison and explanation to sub rule (2) of rule 13N of the
Income Tax Rules, 2002 and suggest that the difference of tax rate between listed and non- listed companies should be at least 5%.
The capital market is under a process to introduce companies’ on SME board, therefore, in order to encourage it is proposed that reduced rate of tax for such listed companies’ be introduced at 20%. Therefore, it is proposed that the tax credit under section 65C of the Ordinance equal to twenty per cent of the tax payable to the companies for opting for enlistment in any registered stock exchange in Pakistan be allowed up-to five year from the tax year in which company is listed.
It is therefore, proposed that the amendment made in Clause (29) of Section 2 and sections 236M and 236N of the Ordinance through the Finance Act 2014 may be withdrawn.
Therefore, PSX proposes the provison inserted by Finance Act 2015 should be withdrawn and exemption under the aforesaid Clause shares of a public company listed on a registered stock exchange in Pakistan should be made applicable to all the REIT Schemes upto thirtieth day of June, 2020. We therefore propose that advance tax on dividend made applicable by the Finance Act, 2015 on REIT scheme may be withdrawn.
The PSX proposed that:- (a) minimum penalty of Rs.5,000/- shall be levied if any person without reasonable excuse falls in filing the return of income u/s. 114 and statement u/s. 115(4), thereafter an additional penalty higher of 0.1% per day of the tax payable u/s. 137(1) of the Ordinance or Rs.500/- per day during the period for which default continues. The maximum penalty should not exceed 25% of the tax payable u/s. 137(1).
(b) Minimum penalty of Rs.2,000/- shall be levied if a person without reasonable excuse fails in filing the wealth statement / its reconciliation u/s. 116 and withholding statement u/s. 165, thereafter additional penalty of Rs.200/- per day during the period for which default continues. The maximum penalty should not exceed 25% of the amount of tax involved. It is proposed that the provision for levy of FED on services of stock brokers under Table II of the First schedule to the Federal Excise Act, 2005 shall be withdrawn retrospectively for the promotion and betterment of the capital market and in the interest of justice & equity. ‘We propose to omit the proviso and Explanation to sub rule (2) of rule 13N of the Income Tax Rules, 2002’, it added.
It is proposed that in order to rectify this anomaly and to facilitate the development of capital market, CVT should be withdrawn on the purchase value of any shares of a public company listed on a registered stock exchange in Pakistan or modaraba certificates or any instrument of redeemable capital as defined under the Companies Ordinance, 1984, or as provided for in clause (E) and (F) of sub-section (2) of section 7 of the Finance Act, 1989. Keeping in view the above we propose that ACT should be made applicable on the listed companies after five years of date of their listing on the stock exchange.
