The federal tax collecting authorities chided taxpayers at Karachi Stock Exchange (KSE) who, sources claimed, are unwilling to honour the controversial Capital Gains Tax (CGT).
The federal government could not realise over Rs10 billion under CGT imposed in the concluding FY2011 budget on individual and institutional investors at KSE due to a lack of required regulatory and collection mechanism for the new tax, stock members and brokers claim. It is indicated that therefore, a large number of KSE members are said to have failed to pay taxes on their capital gains for the first three quarters of FY11, ranging from July to March.
The KSE members and the FBR have been engaged in, what the sources at KSE dubbed, a hidden row over the ‘misconceived’ CGT and its complex collection mechanism ever since the tax was levied by the cash-strapped federal government in June 2010. “Frankly speaking, they have voiced concerns from the outset as most (KSE) members are not willing to pay the tax,” said an investor at the Karachi bourse. And the claim seems to carry enough weight when seen in the backdrop of Friday’s notice served to the stock members by the Federal Board of Revenue (FBR).
“You are directed to ensure that the members who have failed to file their quarterly statements for the first three quarters do file their statements manually,” FBR’s Regional Tax Office (RTO) asked Managing Director Karachi Stock Exchange (KSE) Nadeem Naqvi through a notice issued Friday. This notice came in response to KSE’s earlier letter, KSE/Govt-3706 dated June 14, in which the stock members had expressed concern over some problems being faced by them in the e-filing of their statement.
“Your concerns regarding problems being faced in e-filing of statement and delay in issuance of proposed notification by the FBR have been considered,” said the undersigned, Hasnain Birohi Deputy Commissioner Inland Revenue, Unit 01, Enforcement and Collection Zone 01, RTO Karachi. The deputy commissioner asked the members to ensure submission of the copies of their tax payment challans to his office by the 25th of this month. “Statement for the fourth quarter shall be submitted in accordance with Section 147 (5B) read with SRO 112(1)/2011 dated February 11, 2011,” he said. And that the revenue officer said: “The manual filing of statements does not absolve the taxpayers from filing E-statements for all four quarters.”
Amid claims that most investors at KSE are unwilling to pay the 10 percent tax on capital gains, taxpayers blame the lack of practicable regulations and tax collection mechanism for their anti-CGT stance. Whereas the dispute seems to be lingering, stock analysts term the CGT as one of the major factors in the thin volumes at the country’s largest bourse which, they said, if not recovered immediately, erodes the KSE’s status as Asia’s most liquid equity market.
