Members/brokers and people associated with the stock market business have hailed the Federal Budget 2007-08 presented by the Minister of State for Finance Umer Ayub Khan in the National Assembly on Saturday and termed it market friendly.
They said that concessions and incentives announced by the government for giving boost to the agriculture, livestock and dairy sectors will have a very positive impact on country''s overall economic health, apart from leaving a positive impact on the capital market. They also appreciated the announcement of 15-20-percent increase in pensions for new and older pensioners and said that this money, especially in the wake of reduction in profits rate on saving schemes, will pour in the capital market and improve its liquidity position.
The most significant announcement made by the finance minister in his budget speech is the exemption of capital gains tax on shares transactions, said Syed Asim Zafar, member director of the LSE, while talking to Business Recorder. "As I have understood by the speech of the minister, the government has exempted shares transactions from capital gains tax forever and the market will definitely respond to this positive development, he added. Another significant development is the proposed introduction of group taxation for the companies, under which, their taxes will be adjustable.
Commenting on increase in subsidy for DAP fertilisers, Asim said it would not only strengthen the agriculture sector, which is backbone of the country''s economy, but also the fertiliser companies listed on the stock market. Increase in subsidy amount from Rs 400/- per bag to Rs 470/- per bag will reduce the burden of the farmers and encourage them to work hard to improve their per acre yield. He, however, showed disappointment over finance minister''s silence on the issue of CVT and presumptive tax imposed on shares transactions.
''Overall the budget is good for the market and increase in allocations for various sectors shows growth in economy, which has been possible due to consistency in the government''s economic policies, Asim Zafar, who is also a former chairman of LSE, said.
Mirza Muhammad Ejaz Ullah Baig, Director Capital Vision Securities Ltd, said that the government has announced to provide special incentives for ''demutualised form of the capital market'', which is very good and shows government''s commitment to moving towards this most advanced and modern mechanism being practised world over.
The finance minister has proposed a new taxation schedule for the banking companies, which means the banks will get relaxation in terms of benefits, which will improve their profitability, he added.
Moreover, he maintained, the relief for spinning and insurance sectors is also a commendable step. However, the amount allocated for dams and related infrastructure is just a peanut, as in view of high inflation, construction of big dams requires trillions of rupees, he remarked. But overall its a purely market friendly budget, he said, adding, no extraordinary relief has been announced in the budget, it also contains nothing negative from the market point of view, he further remarked.
Another LSE member Afzal Rahat said that group taxation for companies is a positive step, as it will benefit the small companies falling in this category. As far as capital gains tax is concerned, he added, the Prime Minister has already announced one-year exemption so it is not a development. "And I do not think the government will exempt shares business form capital gains tax forever. As the budget has nothing negative from our point of view, therefore, we can all it a market friendly budget, Afzal Rahat, who is also convenor of LSE Committee on Demutualisation," commented.
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