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  • Jun 6th, 2010
  • Comments Off on Budget impact would be neutral for bourses: analysts
Analysts say the overall impact of budget announcement for FY11 would be neutral for stock market. "Although the government has imposed Capital Gains Tax (CGT) on shares trading in the budget 2010-11, however it was as per expectations and agreement between the government and market players," they added.

The CGT would be charged at the rate of 10 percent if shares are sold within 6 months and 7.5 percent if sold between 6 to 12 months, while no tax would be imposed on above 12 months holdings. "Though the market is expecting CGT, however, this will affect volumes as large portion of individual trading (55-60 percent share) is not declared to tax authorities somehow reduced trading volumes," an analyst at Topline Securities said.

He said the overall theme of the budget FY11 is to sustain the fragile economic recovery with some pro-poor measures at the expense of new taxes, increase in rates and elimination of subsidies. The main task for the new finance minister is to achieve the set goals of revenue enhancement and containing expenditure in the new fiscal year. The key risks to the economy for FY11 are quantum of energy shortages, security situation and external flows.

On the flip side, the FY11 budget has nothing exciting for business community, except for government decision to defer the controversial VAT for three months. He said one-year tax rebate of 5 percent of tax payable on companies who would be listed at stock exchange is a positive step to encourage more listings. The 10 percent tax credit on BMR cost for listed companies is also an incentive for listed companies.

Ahsan Mehanti at Shehzad Chamdia Securities was also of the view that the overall impact of budget 2010-11 would be neutral for the stock market. The imposition of CGT was as per expectations while no other major change was announced in the budget speech, he added. Khurram Schehzad said the overall impact of the budget on stock market would be neutral as no major change is there. He said the reduction in corporate tax from 35 percent to 30 percent is a positive step and will encourage new listings at the share market.

Copyright Business Recorder, 2010


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