Chairman SECP, Muhammad Ali has suggested the possibility of setting up a separate exchange for small and medium enterprises or setting up a separate trading board for such companies.
He floated this prospect at the first IPO summit held in Lahore. Addressing the first Pakistan IPO Summit “Creating Tomorrows Blue Chips Companies”. He opined that several organisations were reluctant to list their companies on the stock exchange due to the discrepancy in the tax code. He reiterated this fact by stating that the high corporate tax rate of 35 per cent is a deterrent for many companies, as private companies enjoy a much lower tax of 25 per cent. He proposed the reduction of corporate tax rate to 25 per cent to make corporate markets more competitive.
Lamenting the imposition of capital gains tax by government as a tool to provide cushion to its depleting revenue, the imposition of Capital gains tax resulted in precipitous reduction in trading volume. He stressed the need to review the capital gains tax.
Furthermore, he stressed the need of demutualisation of the stock exchanges, as it would help mitigate investors’ and brokers’ problems. He attributed the exponential growth of public companies vis-à-vis private companies due to access to more capital at lower rates.
The event was held under the auspices of SAFE in collaboration with LSE and SECP as its lead patron. Business Recorder was the media partner for the event.
The Summit was spread over various panel discussions and presentations by the gurus of the financial markets. The IPO summit was attended by all the big conglomerates of Pakistan including Engro Corporation, Nishat Group, Arif Habib Securities, IGI Securities. Some of the prominent presentations included benefits of listing a company, Corporate Governance & post listing compliance, Debt Market Instruments for Capital Markets, and challenges of public listing for family owned businesses. The participants hoped that such summits would be held regularly and would be instrumental in removing any distorted perceptions about the capital markets in Pakistan.
Addressing the Event, MD LSE and Secretary General SAFE Aftab Ahmed Chaudhry enumerated the benefits of listing a company. He illustrated how companies can tap into monumental amount of wealth by going public. He provided example of recent Glencore International IPO that created 9 billionaires. Furthermore, he attributed the capital markets as an engine of wealth creation for shareholders who have historically received higher earnings as compared to bank returns.
Addressing the auspicious occasion, Ms Ayla Majid, Director ISE, explained the role of corporate governance in aiding to maintain better relationship with all constituents a business can have: shareholders, lenders, consumers, suppliers and regulators. The participants expressed their optimism that such events could serve as springboard for removing any distorted and warped perceptions about the Capital Markets in Pakistan by the enterprises as well as investors. Souvenirs and mementos were also distributed by Chairman LSE Aftab Ahmad Khan to commemorate the
momentous occasion.
If we look around, we notice that different regimes in the world with varying tax systems and laws have different or varying stance on how and whether to apply the capital gains tax. On the individual front, we notice that the people who express strong views are usually the self-interested individuals who have not thought about the question for very long especially from a national perspective However, the common ground that one generally witnesses in most of the developed economies of the world is that the levy in fact mainly falls in the purview of a political compromise at the given time. Still, the most objective test of how much capital receipts enhance taxable capacity in a respective country lies in the specific observation of what its people do with them when they receive them.
That is why most economists believe that the best or the safest answer to the question is moving in the direction of taxation on consumption rather than on income. The Pakistan government also in this respect needs to ensure that in trying to raise its tax revenues it does not deviate from this principle and instead of reinventing the wheel, just do what other sensible governments are already doing.
If we look around, we notice that different regimes in the world with varying tax systems and laws have different or varying stance on how and whether to apply the capital gains tax. On the individual front, we notice that the people who express strong views are usually the self-interested individuals who have not thought about the question for very long especially from a national perspective However, the common ground that one generally witnesses in most of the developed economies of the world is that the levy in fact mainly falls in the purview of a political compromise at the given time. Still, the most objective test of how much capital receipts enhance taxable capacity in a respective country lies in the specific observation of what its people do with them when they receive them.
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