Stock investors agitating against the circular of the Inland RevenueDepartment to impose capital gains tax of 7.5 per cent on the difference ofmarket price and base price (face value) of bonus and rights shares have calledon brokerage firms to halt share trading from tomorrow.

Followingtalks with Joint Secretary Uttar Kumar Khatri, who looks after Economic PolicyAnalysis Division at the Ministry of Finance, investors have announced theirprotest programmes against the move of the government in enforcing CGT.

Investorssaid the talks today ended inconclusively.

“The MoFofficial just listened to our grievances without providing any assurancerelated to changes in CGT calculation,” said Ambika Prasad Poudel, chairpersonof Nepal Investors Forum.

Issuing acircular yesterday, the IRD had directed Nepal Stock Exchange and CDS ClearingLtd to calculate the CGT on the difference of face value of stock and themarket price during trading of rights and bonus shares. Earlier, the governmentused to enforce five per cent CGT in trade of bonus and rights share in thesecondary market.

However, themethod of calculating CGT was different. The CGT used to be enforced on theincome made from the difference in actual price of share traded and adjustedbase price of stocks.

Adjustedbase price of the stock means the price of stock immediately before bookclosure plus the value of share received from rights and bonus divided by thenumber of shares. For example, if the stock price of company ‘A’ was Rs 500before the book closure and the company issued 1:2 rights share, then Rs 500(one unit) plus Rs 200 (face value of two units of rights share) used to bedivided by three (as the investor had one unit share earlier and s/he got twomore from rights share allocation). If the share price of the company has nowplunged to Rs 250, earlier the shareholder would not have to pay any CGT.

However,since IRD changed the calculation method from Sunday and enforced tax in thedifference of actual traded price of stock and face value of that stock, thetrader would now have to pay CGT of 7.5 per cent of Rs 300. Investors have saidthat as the stock prices have been falling along with increased supply, theyhave been incurring losses in recent months. With the new rule on CGT, they arguetheir losses will balloon.

“Earlier,traders had to pay tax only on the profit earned from trading of bonus andrights shares. But the new provision compels share traders to file CGT whetherthey earn a profit or not from selling their shares,” Poudel told THT.

However,Priya Raj Regmi, chairperson of Stock Brokers’ Association of Nepal, said theyhad not received any official letter from investors to halt trading and adecision would be taken tomorrow after holding a discussion with investors.

The benchmarkindex has plunged by nearly five per cent since Finance Minister YubarajKhatiwada presented the federal budget in the Parliament on May 29, or fivetrading days ago.

The localbourse closed at 1,268.84 points today, after dipping 0.4 per cent during thecourse of the day.

Source: TheHimalayan Times, 5^th June 2018