KARACHI  : The Taxation Committee of the Board of the KSE has appreciated the efforts put by the Ministry of Finance and praised the Federal Budget 2013 announced by Minister for Finance on June 12, 2013. They were also highly appreciative of the acceptance of some of the proposals submitted by the Karachi Stock Exchange Limited. Overall, Karachi Stock Exchange Limited believes that various components of the Federal Budget 2013 would have healthy impact on the capital market in Pakistan.

However, the Exchange is of the view that some of the important proposals presented by the Exchange which as to date are not part of the Finance Bill, 2013 need to be reconsidered by the Federal Government in the best interest of investors and stakeholders of the capital market as well as from the macro perspective of broadening the tax base.

Committee said Pakistan’s Capital Market is highly documented and every single transaction made on the Stock Exchange is not only transparent but also fully documented and routed through the banking channels. Further, the capital market is one of the larger contributors to the national exchequer where during the period July 2012 to June 2013 an amount of over Rs 1.8 billion has been paid to the Federal Government on account of Advance Tax on sale/purchase of shares, CVT and Capital Gains Tax. Apart from these taxes, payment of FED to the Federal Government was also being made by the capital market brokers.

The Exchange proposes to the Federal Government to reconsider the levy of 0.5pc of net moveable wealth under Income Support Levy Act, 2013.

Insertion of Section 165 A in the Income Tax Ordinance, 2001 provides a framework to banks for furnishing information about banking transactions to the tax authorities. We feel it will result in undue harassment from tax authorities and tax payers/ account holders shall become very vulnerable to the misuse of the powers given to the tax authorities.

In order to maintain a level playing field, the Exchange proposes that other than those companies and sectors to whom the reduced rate or exemption is available, the general rate of minimum tax be reduced to 0.5pc on the total turnover of the taxpayer.

Removal of exemption to dividend in Specie under clause 103B of the Second Schedule of the Income Tax Ordinance, 2001 is considered to be a negative impact on the capital market.

The Exchange also proposes that the dividend received by a company taxable under section 8 read with sub-section (3) of section 169 which has been brought to the Final Tax Regime (FTR) be revoked, because the adjustment of common expenses allocated to dividend income would not be possible under FTR. It is considered as a detrimental effect to companies and it is proposed that the dividend received by the companies should not be treated under FTR and adjustment of common expenses be allowed.