KATHMANDU, June 28: A task force formed by the Ministry of Finance to resolve the dispute over levying capital gains tax (CGT) on bonus and rights shares is yet to come up with its report.
The ministry had formed the team under the leadership of under-secretary Uttar Kumar Khatri on June 5, giving it 15 days to submit its report. However, the taskforce has failed to submit the report within the given timeframe.
The taskforce was formed to provide suggestions to the government calculation of CGT. The ministry formed the taskforce after investors halted trading in protest of the decision of the Nepal Stock Exchange (Nepse) on CGT calculation on bonus and rights shares.
Nepse had changed CGT calculation formula on the directives of Inland Revenue Department (IRD). However, the decision has been put on hold due to protest of the investors.
“The taskforce's work is ongoing. We are still holding consultations with stakeholders,” Khatri told Republica.
The decision to tweak the formula on calculating capital gains on the sale of rights and bonus shares had even prompted investors to boycott the trading in the stock market, bringing the secondary market to a complete halt on June 5. They had withdrawn their protest after the government formed the task force and put on hold the plan to impose the new formula.
While the capital gains used to be calculated after deducting the price accrued from selling such shares from the adjusted price, the new calculation method means that capital gains will be calculated after deducting the market price of rights and bonus shares from the face value (Rs 100 in most cases).
According to the investors, the change in CGT calculation formula on the basis of base price of Nepse, which was set about 10 years ago through a ministerial level decision, unjustly puts tax burden on them.
Securities Board of Nepal (Sebon) and Nepal Stock Exchange (Nepse) have reportedly given their suggestion to the task force to calculate the capital gains on the weighted average price of the shares of a company including the rights and bonus shares.