KARACHI: Pakistan Stock Exchange (PSX) has demanded eliminating Capital Gains Tax (CGT) for up to next two years in order to attract more foreign investment.
The PSX in its tax proposals for budget 2020/2021 suggested the Federal Board of Revenue (FBR) to eliminate / reduce CGT for next 24 months or at a minimum align rates of capital gains tax on disposal of securities with other regional exchanges and OECD countries of the world.
The PSX said that currently, carry forward of losses is only allowed up to a period of three years and that last year CGT collection was merely Rs1.3 billion. Moreover, with the falling market, tax collection will not be worthwhile at all.
“Therefore, it is suggested that CGT should be eliminated for next 12-24 months.”
This will be a big headline change, with no revenue impact, and will encourage new domestic and international investors to come into the market.
The PSX made following proposals related to CGT:
i. To eliminate CGT for next 12-24 months, if that is not possible then;
ii. Since the current rate of 15 percent is very high and that too is without any benefit of holding period, therefore it is proposed to reduce this rate in line with other regional and OECD countries such as Bahrain, Hong Kong, India, Malaysia, Mauritius, Qatar, UAE, New Zealand, Hungary, Norway etc. where there is no or very low capital gain tax as compared to Pakistan.
iii. when CGT was first introduced in the year 2011, to encourage and attract long term investment, the tax rate was:
Less than six months: 10 percent
More than six months but less than 12 months: 7.5 percent
More than one year: zero percent.
The PSX proposed rates at:
Holding period up to twelve months: 10 percent
Holding period more than twelve months: zero percent.