REUTERS: State Finance Minister Eran Wickramaratne yesterday said concerns about a possible capital gains tax on share trading will be addressed before a proposed revenue bill is passed in the parliament.
The island nation’s main share index has shed 3.9 percent since July 27 and declined in 14 out of the past 15 sessions due to a fall in June-quarter profit and speculation that the new tax reform bill will impose a 28 percent tax on trading stocks.
Trading of shares at the Colombo Stock Exchange is subject only to a transaction levy of 1.12 percent and there is no tax on the profit made.
Market analysts say the new bill will impose a 28 percent tax on trading stocks, defined under the bill as shares which will be sold within a short period.
“We know there is an issue on the trading stocks. It will be taken care of and nothing will be done to damage the market,” Wickramaratne told reporters
The government will present the new Inland Revenue Bill in the parliament on August 25 with amendments after the Supreme Court ruled the major tax reform cannot be passed into law in its current form.
The Supreme Court has ordered the bill under its current form needs to be approved by more than a two-third majority vote in parliament and get the green light from a nationwide referendum. The bill was proposed in May to meet conditions set by the International Monetary Fund for a US$1.5 billion loan it approved last year.“There are a lot of corporate investors who are trading in the market and they will have second thoughts on remaining in the market,” said Prashan Fernando, CEO at Acuity Stockbrokers.
“If implemented, returns will not be attractive and many investors are waiting for some clarity from the government.”
The bill is expected to support fiscal consolidation, make the tax system more efficient and equitable, and generate resources for social and development programs, the IMF, which approved a loan of US$1.5 billion last year, said in August.