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| Sunday, 30 November 2003 |
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Tax on share sales criticised by industrialist The proposed 15 per cent tax on profit on the sale of shares is a negative and untimely move since the Colombo stock market is still a developing and risky market compared to most other markets in the region, said Vice Chairman, Ceylon National Chamber of Industries and Group Finance Director CIC, Preethi Jayawardena. He said the problems in the North and East and political instability are yet to be settled. Therefore, there should be some positive factors to attract foreign and local investors to the market. "During the last few months, we enjoyed a stable exchange rate and growth in the economy, but these factors alone will not attract investors to the market as they will look around to get the best returns for their investments," he said. Introducing a share tax is acceptable once the market consolidates, but not in the present scenario as it will have a dampening effect, he opined. India and Malaysia are said to have imposed a modest tax, but even Hong Kong and Singapore, considered developed markets, do not have such taxes. According to the Finance Minister, the tax is not applicable to individuals, but only to corporates. However, it is still not clear whether it is applicable to foreign investors and unit trusts. If it is applicable to foreign investors, it will certainly have a dampening effect on the market, said Jayawardena. Not only corporates and foreign parties invest in the bourse; even pensioners invest on fundamentally sound stocks, expecting better returns than the prevailing interest rate. "It is not only the rich that invest in the stock market, even the average man does, in anticipation of a better return for his investments. If the market does not perform, what will be the repercussions? The policy makers must understand commerce and industry as theory is very different from practice," he said. He added that the implementation of the plan will result in administrative problems as well since capital gains will not be taxed while profits will be. The budget deficit for 2004 is estimated to be Rs 138 billion or 6.8 per cent of the projected GDP. Therefore, the Government will have to find the revenue to bridge this gap. It is also necessary to increase per capita income; and the remedy should not be to bring down the rich, but to raise the standards of the poor. Expressing his viwes on the Economic Service Charge (ESC), Jayawardena said the credibility of a government is a criteria that attracts investors to consider investments in a country. Therefore, when the Board of Investment states that there are no taxes and surcharges but only an ESC, it tests this credibility and investors will have second thoughts in coming here if the laws are against them. |
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