No change in tax regime for shares business in 2009-10: Tarin

[Naveed Yaseen]

KARACHI (March 15 2009): The government will continue the current tax regime without any change for shares business for the next fiscal year ie 2009-10. This was stated by Advisor to Prime Minister on Finance Shaukat Tarin while speaking at the Top-25 Companies Awards ceremony for years 2006 and 2007 at the Karachi Stock Exchange, here on Saturday.

He said that the current tax regime will continue in 2009-10, however, for the next fiscal year any decision in this regard will be taken after consulting all the stakeholders. Tarin said that the revised GDP growth target of 2.5 percent for the current fiscal year will be achieved. The GDP growth rate is expected to increase to four percent in the next fiscal year, he added.

He said Pakistan was facing severe economic crisis until a few months ago. However, he said the situation has been improved due to a significant reduction in oil prices and food items prices in the international markets, helping Pakistan overcome its current account deficit.

He pointed out that the current account deficit has been reduced by 75 percent to $500 million on monthly basis from $2.1 billion recorded in October 2008. He said that the inflation is expected to reduce to 10 percent by June 2009, while this figure will further decline to six percent in the next fiscal year.

He said at present the global economy is passing through a challenging phase in its history. The latter half of 2008 has seen the world economy slipping into recession, which caused serious damage to the economies of the developing countries. However, despite the worsening global economic outlook and the numerous domestic economic challenges, Pakistans economy has shown enormous resilience. "We have successfully withstood many shocks coming from the various global and domestic sources and as a result of the governments effective economic policies and continuity of reforms, managed to reduce the impact of the global recession on the Pakistani economy," he added.

He said Pakistan is an emerging market with great opportunities and tremendous potential for growth and investment. Given that the basic infrastructure for a vibrant capital market is present, the private sector can play its due role in encashing viable business opportunities. "I expect the private sector to come forward and participate in the future economic progress of the country," he added.

He said it is an undeniable fact that economies and societies have an overriding stake in the development and vitality of listed companies and therefore the requirement for good corporate governance practices form an essential part of a modern and progressive economy. It is important for issuers to focus on achieving the highest possible standards of transparency for strengthening investor confidence. Good corporate governance and improved disclosure standards are of great significance for Pakistan which are making a sustained effort to attract Foreign Direct Investment (FDI) and to restore trust and confidence in international financial markets.

He said that limited capital formation is taking place through the stock exchanges as there are very few companies seeking listing at the exchanges. Issuers do not appear to have enough confidence in the market and see minimal value addition in listing. There is limited free float in the market with a narrow investor base.

He urged the stock exchanges to work more vigorously towards enhancing the level of education and awareness regarding the capital markets, among the Pakistani population, which offers great unexplored potential for increasing the local investor base. Renewed marketing efforts by the exchanges are vital for making unlisted large capital base companies realise the benefits of listing. He urged the stakeholders to come forward and work towards the development of the corporate debt market in the country, which would provide alternative investment opportunities for the investors and offer additional avenues of capital generation for companies. He assured the full support and co-operation of the government, which is committed towards progressive development of the Pakistani capital markets.

He pointed out that on the forefront of the government agenda is a mandate to engage in progressive and proactive reforms for sustainable economic growth. In line with the government vision for a flourishing Pakistan, successful implementation of successive reform measures have supported the capital markets in Pakistan to grow and emerge as one of the important pillars of economy.

He said that the government has been taking several bold initiatives to put the economy back on track. The SECP has successfully implemented broad-based market reforms in the fields of risk management, governance, transparency and investor protection. Undoubtedly, these reforms have made significant contributions towards the growth and development of the capital market through better risk management, enhanced market integrity and improved price discovery and settlement mechanisms.

He congratulated the SECP and the Karachi Stock Exchange for their tireless efforts, which have borne fruit through the recent progress made in finalisation of the Demutualization Act. He assured his full support and commitment in fast tracking the promulgation of this Act and urged the members of the exchange to ensure their full co-operation for the successful implementation throughout the demutualization process in letter and spirit, which will be a milestone achievement in the history of the Pakistani capital market.

Regarding various suggestions and recommendations made earlier in the speeches by the Chairman, Karachi Stock Exchange and the Chairman SECP, especially in the context of reforms in the taxation regime as well as the pending matter pertaining to Railway land, he assured that the government will work on the these issues with the stock exchanges and the SECP so that necessary decisions in the best interests of the countrys developing capital market are taken expeditiously and at the right time.

He congratulated the companies that were presented with this prestigious award and hoped that this will inevitably go a long way in promoting further development and raising the standards of corporate governance in Pakistan.

Salman Shaikh, Acting Chairman, Securities & Exchange Commission of Pakistan (SECP) said that a new asset class has been created in the country as the Commission has granted permission to two REIT (Real Estate Investment Trust) Management Companies (RMCs).

He said that the process of market reforms would be continued to restore the investor confidence in the shares business. He said that the National Assembly Standing Committee has approved the demutualization of stock exchanges and the same bill would be presented in the National Assembly soon.

Kamran Mirza, Chairman, Karachi Stock Exchange said a few of the major initiatives and reforms undertaken during his tenure, to ensure a fair, orderly, transparent and safe capital market, were implementation of VaR based margin system, introduction of Unique Identification Number (UIN) system, introduction of Financial Institutions Margining System, circulation of daily net inflow/outflow of foreign investment, establishment of Capital Market Institute, strengthening the risk management systems, building consensus for demutualization between various stakeholders.

Adnan Afridi, MD Karachi Stock Exchange said that the local share market remained one of the best performing markets in the region. "We have planned to launch more derivative products of international standards to attract more foreign and local investors," he added.

He pointed out that the KSE will introduce sector-based indices by the end of this year. The top 25 companies for 2006 are: Unilever Pakistan, Siemens (Pakistan) Engineering, Rafhan Maize Products, Oil & Gas Development Company, Lakson Tobacco Company, International Industries Limited, Arif Habib Securities Limited, Indus Motor Limited, Engro Chemical Pakistan Limited, Clariant Pakistan Limited, First National Equities Limited, Pakistan Cables Limited, Unilever Pakistan Foods Limited, Colgate-Palmolive (Pakistan) Limited, Fauji Fertiliser Company Limited, Pakistan State Oil Company Limited, Security Papers Limited, Dawood Hercules Chemicals Limited, Ferozsons Laboratories Limited, Shell Pakistan Limited, Al Ghazi Tractors Limited, Pakistan Petroleum Limited, Pakistan Premier Fund Limited, Atlas Honda Limited and IGI Insurance Limited.

The top 25 companies for 2007 are: Unilever Pakistan Foods Limited, Siemens (Pakistan) Engineering, Unilever Pakistan Limited, Rafhan Maize Products, Fauji Fertiliser Company Limited, Pakistan Cables Limited, Arif Habib Limited, Al Ghazi Tractors Limited, International Industries Limited, Dawood Hercules Chemicals Limited, Engro Chemical Pakistan Limited, Clariant Pakistan Limited, Arif Habib Securities Limited, Lakson Tobacco Company Limited, Colgate Palmolive (Pakistan) Limited, Attock Petroleum Limited, Pakistan Petroleum Limited, Ferozsons Laboratories Limited, EFU Life Assurance Limited, Securities Papers Limited, Pakistan Tobacco Company Limited, Oil and Gas Development Company Limited, MCB Bank Limited, Indus Motor Company Limited and Nestle Pakistan Limited.

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