KATHMANDU, July 31: Collection of capital gains tax (CGT), which is levied on profit made through share transactions, declined by around 7.5 percent in 2011/12 compared to 2010/11 due to drop in value of listed shares and persistent slowdown in the stock market.
Data compiled by Nepal Stock Exchange (Nepse) shows CGT collection dropped to Rs 67.9 million during the review period. In 2010/11, the government had collected Rs 73.3 million from CGT.
Total transactions volume, however, increased by whopping 54.12 percent to Rs 10.27 billion in the last fiscal year compared to figures recorded a year earlier. The Nepse index also increased by 26.87 points or 7.71 percent to settle at 389.72 points at the end of 2011/12, despite political instability in the country.
The government had collected record CGT of Rs 910 million in 2008/09 when the Nepse index touched all time high of 1,175 points. Total transaction amount had also increased to Rs 22 billion during the year.
Share analysts said continued fall in share prices has affected profit of investors, leading to drop in CGT collection.
“Most of the investors are selling their stocks at lower prices. Daily turnover at the country´s only stock market is falling. No wonder, CGT collection has been affected,” Anjan Raj Poudel, president of Nepal Stock Brokers´ Association (SBAN), told Republica on Tuesday.
The government is levying CGT of 5 percent and 10 percent on the profits earned by individual and institutional investors respectively.
Bowing to mounting pressure from investors and stock brokers, the government had lowered CGT rate by 5 percentage points from fiscal year 2011/12 in an effort to give a new lease of life to the slackening stock market.
“Though the volume of share transactions increased in the stock market over the year, transaction volume of stock brokerage companies did not go up accordingly,” Poudel said. “Last year, 90 percent of stockbrokers suffered loss due to slowdown in stock transactions.”