~ Stock Market drops by 13.7 per cent during this year
With reports that a Capital Gains Tax is to be imposed on share transactions, the daily trading at the Colombo Stock Market dropped to an unsatisfactory low by noon today (08 March). Accordingly, the All Share price Index (ASPI) dropped by 114.15 per cent, this driving the ASPI to a below 6,000 point low for the first time since 01 April 2014.
In response to an inquiry by Ada Derana Biz, Colombo Stock Brokers’ Association chairman and Director/Chief Executive Officer of the Candor Group Ravi Abeysuriya had this to say:
“There is a rumor currently doing the rounds that a Capital Gains Tax s to be introduced stock market. This has pushed down the ASPI by 100 points today. It is learned that this tax would be imposed not only on the share market. This is being done for the government to earn revenue. The Capital Gains Tax is operational in countries like India, England, the United States etc. Something like this would definitely impact on the stock market.”
Adding further, the Colombo Stock Brokers’ Association chairman said that earlier a transaction tax had been introduced for share transactions but steps had been taken later for this to be removed through the last budget proposals.
“During the last 10 years the government earned a revenue of Rs. 13.8 billion through this tax. It is doubtful whether by removing such a tax and instead imposing a Capital Gains Tax would earn the government such revenue. It is evidently clear how our stock market has reacted just at the news that this tax is to be introduced,” said Ravi Abeysuriya.
While stating that presently foreign reserves have dropped and the best remedy to reverse this is to attract direct foreign investments to the stock market, Abeysuriya said that the introduction of such taxes could discourage foreign investments into Sri Lanka.
“If a Capital Gains Tax is in force, it would cover all sectors. For instance, if a land transaction involves the Capital Gains Tax, then a tax should be also paid on that amount. Not only land, this tax would be liable on any transaction involving Capital Gains Tax.
“In my view an investor’s investments would be considered, the capital gain and loss on the shares of each company calculated and this tax would be affective on the final capital gains of such investments. However, under current circumstances share investments continue to record losses. Hence, the situation is such that instead of the investors paying taxes to the government, it is the government which should pay the investors,” was Ravi Abeysuriya’s final conclusion.
During the beginning of 2016 the ASPI recorded 6,894.50 points and by noon today (08 March) it recorded 5,943.07 points.
Accordingly, so far this year the ASPI has dropped by 951.43 points or 13.79 per cent. The significance here is the ASPI dropping by around 5.5 per cent during the whole of 2015.
