KARACHI: The Pakistan Stock Exchange (PSX) has urged removal of tax on issue of bonus shares, saying that it merely was an accounting entry and not an income. Yet, it discouraged companies from issuing bonus shares.

At a press briefing on Thursday, the PSX also asked for rationalisation of Capital Gains Tax (CGT). “At the time of introduction the government had committed that it will abolish Capital Value Tax and that the CGT rate will be determined after mutual agreement,” said the bourse, lamenting that it however was currently not the case.

A tax rebate of 20pc for one year on the listing of new companies was also introduced in the last budget. The PSX has proposed this rebate be extended for five years to encourage more companies seek listing. Lastly, it was proposed to reintroduce the incentives that were available to REITs last year which were withdrawn shortly after the launch of South Asia’s first REIT.

The chairman PSX observed that there have been frequent changes in the Capital Market Tax regime which was detrimental to encourage investment. “It is therefore recommended that taxation policy should be for a medium- to long-term.”

The chairman contended that PSX represented taxpayers who were contributing over Rs670 billion ie over 20pc of the FBR collection. A number of taxes were collected from the stock exchange namely, Corporate Tax, Super Tax, Dividend Tax, Capital Gains Tax, Capital Value Tax and Sales Tax.

The chairman claimed that the government remains the biggest beneficiary of the stock market’s performance citing that in addition to tax contributions of over Rs670bn, the government had raised Rs453bn and Rs170bn over the last two years through privatisation deals.

In addition to above, the state also received Rs14bn in investment profits from NIT in FY14. The acceptance of the PSX proposals would help in achieving higher value of listed shares with possible increase of Rs1.8 trillion in market capitalisation resulting in increase in value of government’s shareholding in listed companies by Rs340bn as the government holds 20pc of the market, the PSX chief said.

The package, if approved in the budget, will help in raising equities of approximately Rs250bn for privatisation, CPEC projects and expansions. PSX affirmed the need for rationalisation of taxes like Bonus Tax, Capital Gains Tax, Capital Value Tax, exclusion taxes on REITs and Listing Tax incentives.

Published in Dawn, May 27th, 2016