The Joint Economic Adviser, Finance Division, M Osman Ghani, has said that the government is unable to document the stock market transactions (buying and selling of shares) for tax purposes due to stiff resistance from major market players.
He was talking to Business Recorder after the conclusion of a roundtable on "Role of Stock Markets in Economic Development of Pakistan", organised by the Institute of Policy Studies here on Saturday.
He said that the Central Board of Revenue (CBR) might ultimately be able to document the investment in stocks, but at present, it has no intention to probe this matter.
He added that the recent leakage of information about collection of data on buying/selling of shares had created panic in the stock market. "This shows that investors are not ready to disclose their source of income, or details about the investment of their clients," he added.
Dr Iftikhar Ahmed, Chief Executive of Blackstone Equities, said that CBR should rely on indirect taxes for revenue collection, instead of direct taxes. The idea of collecting data on buying/selling of shares "is not feasible" in an economy where 80 percent of investment is concealed. He said the Board was already collecting taxes from the stock exchanges and there was no need of probing the sources of investment, or shares transactions.
He said that the CBR has been meeting revenue collection targets without obtaining details about investors in the stock exchanges. To broaden the tax-base, the CBR could make a long-term plan for gradually bringing all sectors of the economy into the tax net.
He said that there was need to bring retail investors into the stock market to check the manipulation by a few leading brokers. Only one percent of total population invests in stock market as compared to 50 percent population in developed countries.
Dr Iftikhar said that Islamabad Stock Exchange (ISE) had proposed reforms to ensure transparency in the stock market, but the brokers of Karachi Stock Exchange were not prepared to implement these proposals, fearing that it would break their monopoly.
Giving overview of the stock market, Osman underlined the major reforms in the capital market.
He said that the aggregated market capitalisation was Rs 3312 billion (US $55.7 billion) on April 5, 2006, against Rs 339 billion (US $5.8 billion) in June 2001.
In 2005, 19.8 percent of listed companies had shown losses, as compared to 30.2 percent in 2001.
He said that only 10-15 companies were trend-setters in the stock market. Leading sectors included fuel and energy, banks/financial institutions, transport, communication and cement.
The market capitalisation of ordinary shares of cement was Rs 168 billion in March 2006 against Rs 6.7 billion in 1992; fuel and energy Rs 1287.9 billion against Rs 36.8 billion; and the market capitalisation of banks/financial institutions had increased to Rs 770 billion in March 2006 against Rs 33.2 billion in 1992, he maintained.
He said that a World Bank (WB) report on ''''doing business in 2006'''' ranked Pakistan as top reformer in South Asia, and 10th top reformer in the world.
Comments
Comments are closed.