Laxmi Capital News
Govt relents on new tax formula for shares

The government hasdecided not to immediately impose the new formula for calculating capital gainson the sale of rights and bonus shares.

Followinga meeting with agitating investors held at the Ministry of Finance (MoF) onWednesday, the ministry agreed to put on hold until mid-July the revision inthe way capital gains on rights and bonus shares are calculated.

Thestock market, which was brought to a halt by investors to protest the newtaxation system, resumed after the government's decision Wednesday.

Aftermid-July, the government will decide a formula based on the recommendations ofa task force it formed Tuesday to resolve the dispute over the issue.

MoFformed a committee on Tuesday to look into the capital gains tax formula forrights and bonus shares and the committee is expected to submit its reportwithin 15 days. The committee headed by Uttar Kumar Khatri, a joint secretaryand head of the Financial Sector Management Division at the ministry, willinclude a member from the Securities Board of Nepal (Sebon), Nepse andsecurities clearing firm CDS and Clearing Ltd, as well as invited members frominvestor organizations.

Basedon the agreement with investor groups, the Inland Revenue Department (IRD) hassent a letter to Nepal Stock Exchange (Nepse) instructing it to continuecalculating the CGT on the basis of the previous formula until the task forcecomes up with its report.

“Capitalgains will be calculated as per the existing formula until the task forcesubmits its report,” said an official at MoF.

Afterthe government decision to not immediately implement the new formula forcalculating capital gains, the stock market resumed trading. Stock trading washalted completely on Tuesday and partly on Monday on the appeal of investorgroups and with the tacit support of brokerage firms .

TheNepse benchmark index jumped 13.91 points after the resumption of trading.

Nepsehad announced that it would impose the CGT on the sale of rights and bonusshares from Sunday as per the new calculation method following a circular fromIRD last Friday.

TheIRD decision to tweak the formula comes in the wake of the government's effortsto shore up its revenues. IRD has cited the Income Tax Act to instruct Nepse tocalculate capital gains on rights and bonus shares.

Investorsargue that the new formula would require them to pay CGT even in case of losswhile selling their shares.

Apartfrom tweaking the calculation method for capital gains, the government in itsbudget speech separately decided to increase the CGT rate to 7.5 percent from 5percent.

Source:MyRepublica, 7th June 2018

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