Government functionaries already sit on the policy board and SECP Chairman has been given a torrid time in getting approval of the pay and perks for its staff by the officials on the Board.
The present Chairman had been facing difficulty in attracting requisite talent without matching the scales in the private sector. It took nearly a year to have the salary structure at SECP realigned. The new change nullifies the arms-length distance between the regulator and the government.
The Finance Bill FY08 has incorporated a host of proposals from the SECP. Some of them are:
(A) PRIVATE EQUITY AND VENTURE CAPITAL FUND: Private equity is a certain kind of investment, which plays an important role in the domestic economy. It aids the expansion of private companies through provision of additional funds and administrative ability bringing out their hidden value. In order to speed up investment in this area, the Private Equity Fund has been made tax exempt till 2014. In case assets or shares of private companies are sold to Private Equity and Venture Capital Funds, the rate of Capital Gains Tax has been reduced from 35% to 10%.
(B) REAL ESTATE INVESTMENT TRUST (REITS): Through REITs a new form of investment tool is being introduced for investment in capital markets which will enable small investors to reap profits from investments in real estate, which, so far, was open only to large investors. In order to increase use of REITs their use has been given tax concession. For example, the profit of REITs, will be exempted from taxation up to 90%, upon distribution. The most important tax concession for REITs is that under this scheme sellers of property will be exempted from tax up to 2010.
C) AMENDMENT IN COMPANIES ORDINANCE: For the benefit of shareholders, any shareholder who has 12.5% shares of any company can call for an election of new Board of Directors in the next AGM. In order to provide protection to minority shareholders, any person or persons with 20% or more than 20% shares of any company, can request SECP for special audit.
(D) DEMUTUALIZATION: In order to bring our capital market up to international standard the demutualization of stock exchange is being implemented. Under this assets of stock exchange transferred to demutualized exchanges will be given special tax treatment.