Capital gains – on again, off again!
Stock market stakeholders can toast the decision to (re)-scrap the capital gains tax on Colombo Stock Exchange (CSE) transactions. Sources close to the Finance Minister Ravi Karunanayake told the Business Times that the Treasury has decided to do away with the decision to impose capital gains on CSE transactions at the forthcoming budget with ministry officials also confirming this. The government was oscillating on implementing this tax amidst acute displeasure by the industry and has now focused on the ‘right’ direction, an analyst said. Introduced after a hiatus of 29 years at the last budget, the rationale for this tax was to lure in the top 20 per cent who own 80 per cent of the capital in the country.
The industry was crying out against this tax saying that there is great uncertainty over the application of capital gains tax, including the rate, and its calculation was beyond cumbersome. They said this tax is being imposed at a time when the CSE has fallen considerably necessitating the enforcement of buoyant policies to heighten confidence, and let the bourse grow. This resistance prompted the government to re-introduce the share transactions levy in April. ”So now the decision to retain this levy would do some good for the stock market,” an analyst said. “Changing the goal post is the worst thing for the CSE. When this happens, all investors lose faith and they adopt a wait-and-see approach,” he said.