The federal budget announced by the state minister for finance Omer Ayub Khan on Monday received a mixed response of the brokers of Lahore Stock Exchange (LSE).
Former LSE chairman Syed Asim Zafar said that all the reports regarding levy of Capital Value Tax (CVT) on real estate and doubling it for stock brokers had already been discounted, therefore, their impact on the market will not be of much significance.
People had pretty good idea of increasing the CVT burden on stock brokers and taxing the real estate business, thus the market was unlikely to give much reaction to this move. "However, I would not say it a market friendly budget," he added.
According to him, last year the government had collected Rs 6 billion as against the target of Rs 4 billion under the head of CVT, but now it might not achieve the revised target of Rs 8 billion by increasing the tax from 0.01 percent to 0.02 percent.
Doubling of the CVT rate will lower the trading volumes and the government will not be able to achieve the desired results as the growth witnessed in the collection last year was due to lower CVT rate, he pointed out. He however, said that increase in profit rate on saving schemes will benefit the common man which was praiseworthy step on the part of the government.
He also hailed the government for enhancing minimum wage from Rs 3,000 to Rs 4,000. About reduction in tax on dividends of the companies, he said it will encourage share-holders to invest in dividend-paying listed companies, he observed.
Dr Yasir Mahmood, also an ex-chairman of the Lahore bourse, said that rise in CVT will definitely impact the traders but will have hardly any impact on the investors. This move will also discourage speculation in the market, which would be a healthy sign. "I understand that apart from generating revenue for the government, this measure will minimise speculation in the market or in other worlds, it will encourage investment and discourage speculation in the market," he viewed.
About imposition of 2 percent CVT on real estate business, he said it will discourage speculative forces engaged in this business, which in his view was a positive indicator. "Overall it is an aggressive and ambitious budget, aiming at winning the hearts of people ahead of the general elections," he remarked.
About enhancing the tax on bank withdrawal from 0.1 percent to 0.2 percent, Dr Yasir Mahmood said it would discourage cash withdrawal on day to day basis and promote the government agenda of documentation of economy.