Budget fails to include capital market

KATHMANDU, APR 11:

The lusterless full budget did not bring any expected changes for the capital market due to the absence of major policies and programmes.

The capital market was expecting the full budget to address changes in the tax regime and tax exemption on mutual funds. However, the budget could not include any of these changes due to its limitations.

Securities Board of Nepal (Sebon) had suggested the revenue administration to implement ‘pay per transaction’ tax system instead of the current regime of capital gain tax to simplify tax calculation for investors.

The capital market regulator had proposed the amendment in taxation for stock market transactions earlier in July — before the budgets are supposed to be announced.

Since the full budget was not announced on schedule, capital market stakeholders had set their heart on the probable full budget announcement for any changes in tax regime.

Moreover, since the current government’s priority is to successfully conduct the elections, the financial sector remained in the backburner. The budget has assured continuity of existing projects

and programmes and some incentives for farmers to stimulate the economy but the capital market did not even get a mention in the whole document.

“We had reminded finance minister Shankar Koirala regarding the changes needed but they could not be brought because the current finance administration does not have the authority,” said chairman of Sebon Baburam Shrestha.

Sebon had requested both the Ministry of Finance and Revenue Consultation Committee to levy transaction tax for shares being held for a longer period and capital gain tax on short-term investments that are speculative in nature, if the government does not deem it necessary to remove capital gain tax.

At present, the government levies five per cent capital gain tax on transactions that are profitable.

Likewise, mutual fund managers were also hoping for some provisions to encourage mutual funds in the capital market.

To promote mutual funds in Nepal, fund managers have been lobbying for some tax discounts to unit holders on mutual fund gains and dividends to engage more public in the capital market.

“The next fiscal year is only three months away which is not a long time. We are hopeful that the budget for fiscal year 2013-14 will bring the necessary changes needed in the tax design of the Nepali capital market,” said Shrestha.

Earlier, the budget was supposed to prepare a base for Sebon to regulate the commodities market. However, the idea was shot down by the Ministry of Law due to the absence of proper authoritative and legal grounds for Sebon in the existing Securities Act.

Source: THT