Stock traders protest against new tax ratesStock traders on the floor of the Nepal Stock Exchange (Nepse) halted transactions for half an hour in protest against the government’s decision to revise the capital gains tax threshold on the sale of bonus and rights shares.
Stock traders on the floor of the Nepal Stock Exchange (Nepse) halted transactions for half an hour in protest against the government’s decision to revise the capital gains tax threshold on the sale of bonus and rights shares.
Complaining that the new system would hit hard investors who are facing losses in share transactions, upset brokers also picketed the Nepse central office at Singha Durbar to express their dissatisfaction at the government’s move.
Last Friday, the Inland Revenue Department (IRD) wrote to the Securities Board of Nepal, Nepse and CDS and Clearing instructing them to revise the capital gains tax threshold on bonus and rights shares. The IRD has asked them to charge capital gains tax as per the Income Tax Act 2002. As per the new directive, investors are required to pay capital gains tax on the sale of rights and bonus shares on the basis of the market value of the company’s shares.
The Nepal Investors Forum, Shares Investors’ Association Nepal and Nepal Capital Market Investors Association have launched a protest against the decision.
Rajan Lamsal, general secretary of the Nepal Investors Forum, said, “We are ready to pay the tax if it is imposed on the earnings secured by investors. However, if the tax is computed based on the market price, it will affect those who are facing losses in share transactions,” Lamsal said.
Investors also described the capital gains tax as being income tax in advance. “Investors are required to pay additional income tax on top of the capital gains tax, which is against the principle that double taxation cannot be imposed on taxpayers,” said Lamsal, adding that they had urged the government to define capital gains tax as final income tax.
Meanwhile, the government has revised the capital gains tax rate through the budget statement for the fiscal year 2018-19. Investors will have to pay 7.5 percent capital gains tax on the sale of primary shares from the beginning of the new fiscal year. Currently, the capital gains tax is 5 percent.
Lamsal said investors had no problems with the increase in the capital gains tax rate. “But it is unfair to make them pay capital gains tax when they are incurring losses.”
Tara Fulel, vice-president of the Share Investors Association, accused the government of being excessively revenue oriented. “Instead of focusing only on generating revenue, the government needs to encourage investors in the capital market by imposing tax on the earnings of investors,” said Fulel. He added that they would come up with further protest programmes after meeting with investors on Monday evening.
Meanwhile, a delegation of investors called on Finance Joint Secretary Uttar Kumar Khatri on Monday to present their demands . “Khatri just assured the investors that their grievances would be conveyed to high ranking ministry officials,” Fulel said.
Revenue Secretary Shishir Kumar Dhungana could not be contacted despite the Post’s repeated attempts.
Nepse down 5.11 points
The Nepal Stock Exchange (Nepse) lost 5.11 points on Monday to close at 1,268.84 points. Despite the protest programme launched by investors, the market turnover amounted to Rs430.38 million.
On Sunday, the Nepse plunged 33.71 points on government moves to revise the capital gains tax threshold on bonus and rights shares. (PR)