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June 12, 2019

Brokers hail no new tax on trade


June 12, 2019

KARACHI: Market players have welcomed the Federal Budget 2019/20 after no additional taxes were announced on the stock exchange, which will help in maintaining a positive momentum.

In the budget speech, Minister of State for Revenue Hammad Azhar said that the government has not proposed an increase in corporate rate for companies, despite acute budget pressure to promote corporatisation.

“It has also been ensured that in a gradual manner the tax rate on disposable income in the hands of businessmen undertaking business within the corporate sector remain equal to those undertaking business in non-corporate sector.”

Ahsan Mehanti, chief executive officer of Arif Habib Commodities, said that the budget was positive for the capital market investment, as the taxation measures announced were below the market expectations.

“We were expecting increase in corporate tax, but it was kept unchanged at 29 percent, while no taxes were imposed on stock trading costs, and we expect a positive momentum at the local bourse, going forward.”

As far as corporate sector is concerned, additional taxes and duties have been proposed on auto and cement sectors, which could impact corporate profitability, he added.

Khurram Shehzad, chief commercial officer at JS Global Capital, said the budget was not as bad as was expected.

“Despite being an austerity budget, it is not as much severe and definitely positive for the equity markets.”

Schehzad said that contrary to the expectations, corporate tax, sales tax and capital gains tax (CGT) were not increased, while the government has proposed reduction in super tax and aligning tax rates for banking sector with the rest of the corporate sector.

Analysts believe the budget would dent some of the sectors, but strict measures for the real estate sector, where tax has been increased on the sale of plots and constructed homes, might bring some fresh flows in equities.

Samiullah Tariq, director research at Arif Habib Limited, said that some sectors would receive brunt because of increased federal excise duty on cement from Rs1.5/kg to Rs2/kg, flat tax rate applied on steel of 17 percent and increase on sales tax on sugar from eight percent to 17 percent.

“However, series of taxation measures announced on the real estate would divert funds, which were earlier parked in the sector, to

stock market, while salaried class to pay less tax may start buying mutual funds to get tax


“Budgetary measures will help increase revenue and bring fiscal discipline and stabilisation as advised by the International Monetary Fund. Measures on property valuation, non-tax filers and presumptive tax will support bringing down primary deficit,” said Mohammad Sohail, chief executive officer at Topline Securities.

Another factor, which might help increase inflows to the capital market, has been increase in the taxation numbers on the debt instruments.

Moreover, tax rate on debt instruments has been raised to 15 percent from 10 percent on amount exceeding Rs5 million, which would attract fresh flows to the market.