May 21, 2021 (MLN): Pakistan can attract foreign investors by replacing the current capital gain tax (CGT) with a flat turnover-based tax for foreigners, said Mattias Martinsson, Founder and Chief Investment Officer at Tundra Fonder.
He stated that the current CGT which comes with tax auditors and burdensome administration kills foreigners' interest.
In a series of tweets, he proposed the country should eliminate the requirement of unique Investor ID for regulated investment banks as Know Your Customer (KYC) and Anti-Money Laundering (AML) are already checked these days.
The current regime makes it impossible for online brokers to provide market access. At least Swedish retail investors would like to have access as Sweden is known for stringent financial supervision, he added.
He suggested that Pakistan can attract Norwegian investors because there is a functioning double-taxation treaty in place in Norway and has a large Pakistani diaspora.
Recently, Pakistan Stock Exchange (PSX) presented important budgetary proposals for 2021-22 to boost economic growth and address key structural imbalances in Pakistan’s economy.
To increase the size and depth of the capital market by incentivizing new listings and increasing the investor base, without impacting government revenues, PSX proposed the CGT for listed securities should be aligned with that of other asset classes and brought in line with international levels.
A reduction or elimination of the CGT would be a major incentive to attract new local and foreign investors, without any significant loss of tax revenue and that will in fact increase tax revenue in the medium term as the current CGT rate is very high for listed investments.
