PSX demands incentives a la everyone else.

Byline: Dilawar Hussain

'PLEASE, sir, I want some more!' the nine-year old boy told the master of the workhouse where the boys were given three meals of thin gruel a day and an onion twice a week, leaving them hungry. But the demand made the master very cross.

The words from Charles Dickens' Oliver Twist continue to startle the 'masters' whenever someone makes such demand. Regardless, the Pakistan Stock Exchange (PSX) in its budget proposals for 2020-21 has asked for more.

'Eliminate capital gains tax (CGT) for the next 12-24 months,' says the PSX. 'If that is not possible, then reduce the CGT rates for (holdings of) up to 12 months at 10 per cent and remove it altogether for holdings of more than 12 months.'

The exchange says the last year's collection of CGT was merely Rs1.3 billion. With the falling market, tax receipts would not be worth the collection effort. Introduced in 2011, CGT had different rates for different holding periods. The rate was 10pc for less than six months. It was 7.5pc for more than six months but less than 12 months. It was zero for holdings of more than one year. But all that was changed and currently the tax is levied at a flat rate of 15pc irrespective of the holding period.

PSX Chairman Suleiman Mehdi says extraordinary times call for extraordinary measures. He points out that most industries have received incentives, special packages and relaxations owing to the devastation caused by the pandemic. These measures include a steep cut in interest rates, incentives for the construction industry and an upcoming package for the agricultural sector. The PSX as a barometer of the economy also deserves a fair deal, he says.

The stock exchange has asked the government to rationalise the tax rate on dividends to make it equal to that on profit from debt instruments

The exchange has asked for a reduction in CGT as an alternative to its elimination, he adds. Mr Mehdi says investors have suffered losses in the last two years. Since the collection was minuscule last year, reviewing it will send a positive signal to foreign investors. It will force them to give the PSX a closer look as it is trading at an attractive multiple of 5.5 times forward earnings and providing a yield of 6.5pc against the regional price-to-earnings multiple of 10 and yield of 3pc. Shares were also alluring as the cost of replacement of the plants has dropped to one-third.

Khalid Mirza, chairman of the Securities and Exchange of Pakistan (SECP) Policy...