Govt to reintroduce share transaction levy on SEC plea
The government, responding to an appeal made by the Securities and Exchange Commission (SEC), is to reintroduce the share transaction levy and scrap the idea to slap capital gains tax on capital market transactions, sources close to the Prime Minister’s office said. This follows SEC Chairman Thilak Karunaratne stating that the SEC has made representations to the Prime Minister to remove the proposed Capital Gains Tax (CGT) from the Colombo Stock Exchange (CSE). Delivering the keynote address at the Colombo Club luncheon meeting on Thursday, the SEC chief said, “I have written to the Prime Minister on this and appealed and hopefully the share transaction levy will be reintroduced and the Capital Gains Tax may not be imposed. “The earlier share transaction levy of 0.03 per cent was scrapped by the budget in 2015 in a bid to encourage market transactions.
With the global turmoil and adverse domestic factors, the capital market failed to perform during the past two years. Mr. Karunaratne said that the share transaction levy won’t fetch a lot of cash for the state – Rs. 2 billion on average annually – but it’ll be a huge impetus to the CSE. Comparing some regional statistics on the CGT, he said that Malaysia does not tax capital gains from the sales of investments or capital assets other than those related to land and building. In Thailand if an individual earns capital gains from a security transaction in the Stock Exchange of Thailand, it is exempted for tax purposes. “Gains from the sale of a property, shares and financial instruments in Singapore are generally not taxable and in Indonesia capital gains are taxable as ordinary income, and capital losses are deductible Sale of shares listed on the Indonesian Stock Exchange.”
On freeing the CSE from the doldrums that it’s currently in, he said that it’s important to encourage EPF, ETF and other provident funds to increase their exposure to the CSE. He said that if these annuity funds raise their exposure to at least 20 per cent in CSE – especially when foreign funds take flight, it’ll be a great boost. Meanwhile informed sources said the issue was also taken up at this week’s Cabinet Committee on Economic Management meeting. Here the Finance Ministry was directed to study and propose the implementation methodology and whether to apply the tax in the form of a transaction cost for the share market transactions. It was also decided that the matter should be further discussed at the next meeting.