The last few weeks has seen the Karachi Stock Exchange nudge upwards. That has predictably led to cautious excitement. Could it be that we are returning to the glorious days of the Musharaf regime, when Pakistanis proudly pointed to KSE as one of the best performing stock markets in the world?
Well, our Finance Minister threw a bone at the KSE, and its oligopolistic board members by offering concessions in the Capital Gain Tax, that now it can be paid without any need whatsoever for the tax payer to declare his/her source of income. If that wasn't enough, the Finance Minister also withdrew Withholding Tax on brokers commissions.
The stock market surged after hearing this news, and supposedly we as a nation should be happy and excited that this incompetent government has succumbed to your demands. I say your demands, as according to one Arif Habib, WHT was a double taxation and it was the public demand to remove it.
I mean who says your government doesn't listen to you?
Over the last 10 days people have gotten excited, equating removing CGT with increasing investment, that would lead to economic growth. Such comments and views, usually receive many likes and recommendations. This false economy (literally), within which Pakistan operates has led to a vicious cycle of unsubstantiated economic theorising that neither serves Pakistan, her economy, or indeed the long term goals of those people, advocating for such exemptions.
Strictly speaking, buying shares in the Karachi Stock Exchange is hardly investment. The type of investment, a country like Pakistan should be interested in is one which leads to the accumulation of fixed capital, machinery and job creation. The more illiquid the better.
Getting all excited over foreign investors placing a few million dollars in the KSE is hardly an achievement. The money comes, earns some fees for local brokers, later those shares are sold and the money is remitted abroad. For all that effort, nothing is actually "produced" or added value or welfare to wider Pakistani society.
While the SECP has successfully lobbied for tax concessions for itself, it seems that the rest of the country doesnt have such luck. Inflation over the past few years has pulled the salaried class into higher tax bands. Rising prices means that consumers pay ever higher amounts of excise duties and GST on their expenditure. By offering concessions to brokers and investors/speculators on the stock market the government has done little more than shift the incidence or burden of taxation squarely on the less well off.
The rich in Pakistan, like any other country in the world, perform very well as tax evaders and avoiders. They control the resources that allows them to influence state policy, transfer their wealth abroad and evade paying taxes within Pakistan.
However, what is really a kick in the teeth is that they are able to portray concessions to their tax rates, as something in the national interest. Looks like our financial masters have been following the Republican debates quite enthusiastically and have a PA on hand to make notes.
One of the ill effects of the mid 2000s was how people made money out of nothing. People pumped money into NIT, IPO's of state organizations such as PPL and doubled their investment in a matter of weeks. Everyone had a go, queuing up, buying firms, opening brokers outlets. The speculative bubble even sucked in municipal authorities such as the Capital Development Authority who has lost more than half of its investment in various shares on the stock market.
The fact that a tax payer funded organization was able to gamble away public money and no one is held to account is nothing less than criminal negligence. Especially considering the uneven manner in which money has been lavishly spent on some parts of the capital city, while other areas remain in shambles. People have not received compensation for land taken over by the CDA for over 2 decades in some cases, yet the stock market seemed a worthy destination for public resources.
I wonder which brokerage house earned a killing on CDA's share trades?
I for one am not excited by any rise in the KSE, for any stock markets performance is far removed from the real economy. However, over the coming weeks, I am all but certain, that Business Sections in different papers will be full of articles predicting a coming boom or a return to the "good ol days". However, those days were not so good and a boom is followed by a bust.
However, fear not, no brokerage houses will be harmed.
Well, our Finance Minister threw a bone at the KSE, and its oligopolistic board members by offering concessions in the Capital Gain Tax, that now it can be paid without any need whatsoever for the tax payer to declare his/her source of income. If that wasn't enough, the Finance Minister also withdrew Withholding Tax on brokers commissions.
The stock market surged after hearing this news, and supposedly we as a nation should be happy and excited that this incompetent government has succumbed to your demands. I say your demands, as according to one Arif Habib, WHT was a double taxation and it was the public demand to remove it.
Joy!
I mean who says your government doesn't listen to you?
Over the last 10 days people have gotten excited, equating removing CGT with increasing investment, that would lead to economic growth. Such comments and views, usually receive many likes and recommendations. This false economy (literally), within which Pakistan operates has led to a vicious cycle of unsubstantiated economic theorising that neither serves Pakistan, her economy, or indeed the long term goals of those people, advocating for such exemptions.
Strictly speaking, buying shares in the Karachi Stock Exchange is hardly investment. The type of investment, a country like Pakistan should be interested in is one which leads to the accumulation of fixed capital, machinery and job creation. The more illiquid the better.
Getting all excited over foreign investors placing a few million dollars in the KSE is hardly an achievement. The money comes, earns some fees for local brokers, later those shares are sold and the money is remitted abroad. For all that effort, nothing is actually "produced" or added value or welfare to wider Pakistani society.
While the SECP has successfully lobbied for tax concessions for itself, it seems that the rest of the country doesnt have such luck. Inflation over the past few years has pulled the salaried class into higher tax bands. Rising prices means that consumers pay ever higher amounts of excise duties and GST on their expenditure. By offering concessions to brokers and investors/speculators on the stock market the government has done little more than shift the incidence or burden of taxation squarely on the less well off.
The rich in Pakistan, like any other country in the world, perform very well as tax evaders and avoiders. They control the resources that allows them to influence state policy, transfer their wealth abroad and evade paying taxes within Pakistan.
However, what is really a kick in the teeth is that they are able to portray concessions to their tax rates, as something in the national interest. Looks like our financial masters have been following the Republican debates quite enthusiastically and have a PA on hand to make notes.
One of the ill effects of the mid 2000s was how people made money out of nothing. People pumped money into NIT, IPO's of state organizations such as PPL and doubled their investment in a matter of weeks. Everyone had a go, queuing up, buying firms, opening brokers outlets. The speculative bubble even sucked in municipal authorities such as the Capital Development Authority who has lost more than half of its investment in various shares on the stock market.
The fact that a tax payer funded organization was able to gamble away public money and no one is held to account is nothing less than criminal negligence. Especially considering the uneven manner in which money has been lavishly spent on some parts of the capital city, while other areas remain in shambles. People have not received compensation for land taken over by the CDA for over 2 decades in some cases, yet the stock market seemed a worthy destination for public resources.
I wonder which brokerage house earned a killing on CDA's share trades?
I for one am not excited by any rise in the KSE, for any stock markets performance is far removed from the real economy. However, over the coming weeks, I am all but certain, that Business Sections in different papers will be full of articles predicting a coming boom or a return to the "good ol days". However, those days were not so good and a boom is followed by a bust.
However, fear not, no brokerage houses will be harmed.
There is lot of articles on the web about this. But I like yours more, although i found one that’s more descriptive.
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