Tax and payout reforms on cards to promote capital markets – Alfalah Securities Limited

Karachi, June 08, 2012 (PPI-OT): The Senate Standing Committee on Finance has recommended measures relating to providing more dividends to shareholders and offer tax incentives to enlist.

According to Alfalah Securities Limited, it is recommended that listed companies with free reserves of more than 50% of its paid up capital should distribute at least 40% of taxed profit as cash dividends to shareholders. Also, to encourage companies to get listed on stock exchange, it is suggested that there should be a tax difference of 5% between a private limited company and a public listed company. It was decided that both the recommendations would become applicable from July, 01, 2013.

Alfalah Securities Limited believes that although the higher dividend payout requirement would bode well for the stock market investors, it would also have negative repercussions as it would constrain the ability of the companies falling under the criteria to go for expansion which is negative for the economic growth. While, the tax incentive provided to encourage enlistment would be positive for the development of the stock market and improving corporate governance and transparency in disclosure of accounts.