Pakistan Stock Exchange (PSX) in its proposals for budget 2023-2024 suggested to align rates of capital gains tax on disposal of listed securities with the rates of CGT on sale of immovable property.
The PSX has submitted its tax proposals for the budget 2023-2024.
Giving rationale to the proposal, the PSX stated that it would encourage documentation of real estate activity, and lead to an easing of speculative pressure on real estate property prices in Pakistan, where much of the undocumented wealth has been currency flowing.
READ MORE: KSE-100 index gains 82 points amid lack luster sentiments
The stock exchange in its proposals suggested to align rates of capital gains tax on disposal of listed securities with the rates of CGT on sale of immovable property.
During discussions with respect to the Federal Budget 2022-2023 with the than finance minister and the chairman of the Federal Board of Revenue (FBR), a consensus was developed that the tax on capital gains on the listed securities should be uniform with that on real estate and other classes of assets.
“This is important to remove any tax driven distortions amongst different asset classes and to create a level playing field to ensure efficient allocation of scarce resources,” it added.
On June 10, 2022, Finance Bill 2022 addressed the issue through introduction of revised rates based on holding period, aligning capital gain tax rates on disposal of securities with rate of disposal of immovable properties. “However, the Finance Act, 2022 has again created such tax disparity between securities and immovable properties.”
READ MORE: Pakistan stock market begins week with gain of 58.32 points
The stock exchange further stated that currently carry forward of loss is allowed up to a period of three years. Last year and the year before CGT collection was merely Rs 5.6 billion and Rs 8.8 billion respectively.
Moreover, brought forward losses amounting to Rs 281 billion are available to be adjusted against future capital gains, therefore CGT collection will continue to be negligible.
In addition, all derivatives and future contracts traded on stock exchange are subject to higher CGT that should be aligned with future commodity contracts traded at PMEX.
READ MORE: Weekly Review: PSX investors’ sentiments linked to IMF program
The PSX has proposed capital gains tax (CGT) rate should be reduced to 5 per cent for all derivatives and future contracts traded on stock exchange.
The proposed tax rate is in line with tax rate on future commodity contracts entered into by the members of Pakistan Mercantile Exchange.
It is also recommended by the PSX to remove the flat CGT rate of 12.5 per cent applicable on disposal of securities acquired on or before June 30, 2022, so that gain on such securities be subject to the same rates as applicable on securities acquired after June 30, 2022.
