KARACHI: For investors in stocks, federal budget 2016-17 sprang no major surprises. Stock market strategists thought that most of the proposals were according to expectations.
The decrease in corporate tax rate by one per cent to 31pc was according to schedule, though some were dismayed over the government’s avoidance of higher taxation for the private limited companies so as to attract more of them to listing.
“The extension of tax relief to newly-listed companies was, however, positive,” said one analyst, though considering just three listings this year, he wondered if it really was a big enough incentive.
Several analysts said that the government had tried to sift the filers from the non-filers by increasing the tax on dividend on non-filers and higher Capital Gains Tax on non-filers. But no one thought it would drive the non-filers out of the market. One enterprising investor explained “I will sell one day ahead of the stock turning ex-dividend and buy the next day.”
Arif Habib, former chairman of KSE, did not seem too happy over the market-related levies and said that the government seemed to have set aside the well-considered pre-budget proposals by the KSE.
He observed that the tax on bonus shares was not waived while the capital gains tax rationalisation was also brushed aside; the tenure was extended for one year.
He did not think it wise to levy both the Capital Value Tax and Capital Gains Tax at the same time.
Arif Habib also was dismayed by the non-consideration of proposals regarding REITS.
He, however, was encouraged by the extension of tax exemption for new listings.
The former chairman appreciated the measures announced for the agriculture and export sectors. Mohammad Sohail, CEO at Topline Securities, commented that the budget had neither surprises nor out of the box measures. As expected, agriculture sector has been given incentives after its growth suffered setback. “For the stock market, budget measures are neither good, nor bad and there is no major step. Thus it is neutral for the equity market which will now focus on MSCI meeting outcome,” commented Sohail.
Another stockbroker pointed out that the new levy of super tax at 4pc for banks and 3pc for others was extended for one year, which was depressing.
Fawad Khan, Director of Research and Business Development, KASB Securities, termed the budget “more of the same.”
He thought that the government’s emphasis was on fiscal consolidation and curbing tax avoidance. Since agriculture and exports had been a bane on the GDP growth in the current fiscal year, the government was lavish in giving those sectors more incentives which was a right move. He thought that on a cursory look, the budget could be termed negative for insurance sector since the income derived by insurance companies under various heads were taxed at separate rates and now clubbed together at the same rate.