Apropos editorial 'Leakages from the tax system' carried by Business Recorder on June 27, I was surprised by your criticism on the capital gains tax (CGT) rate in the Finance Bill 2014.
No doubt the original proposal for increasing the CGT rate was 17 percent for holding securities for less than one year. However, at the time the CGT was imposed, the then Finance Minister, Dr Hafiz Sheikh had announced to withdraw CVT on purchases and withholding tax on sale of securities. Unfortunately, this commitment was not honoured. It must be noted that only 7 percent of the investors (individuals) are registered with NCCPL, which has collected Rs 1.25 billion up to April 2014.
The broad-basing of the tax base by roping in massive tax evasion in real estate by imposing only 1 percent tax is the reflection of half-hearted measures. Trillions of rupees are involved in this sector where the collection rate is way below the market rate. This sector does not contribute towards job creation or any industrial development. On the one hand, agriculture sector which is about 24 percent of GDP and contributes only 2 percent in taxes, is left out on the pretext that it is a provincial subject but on the other, support prices of all crops are fixed by the federal government.
I hope the newspaper will also focus on these blatant shortcomings and does not unnecessarily criticise the most documented and compliant capital market.
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