Develop capital market
The government should address some issues immediately for the development of the capital market and the secondary market,
• The capital gain tax should be reduced to 10 per cent again.
• If the implied tax rate on the return of corporate as well as government bonds is equalised it will increase the possibility of cross transactions between individual and
institutional investors. The different tax rate
for individuals and
institutions forces investors to sell bonds to their own groups.
• The minimum face value of each transaction of government bond is Rs 25,000 and no owner can hold government bonds below that. This is impractical. The minimum denomination for transaction and holding government bonds should be Rs 1,000 which is compatible with international traditions.
• To lure large companies to get listed
in the stock exchange
tax concession up to two per cent should be
given. Five per cent tax concession for companies listed in Group A would be suitable.
• Nepse branches should be opened outside Kathmandu to incorporate investors from remote areas and widen the scope of capital market. For sustainable development of capital market, following points should be implemented:
i. Stronger legal and regulatory provision.
ii. Clear tax policy for capital formation.
iii. Enough infrastructure and resources.
iv. Ease restrictions on foreign investment in secondary market.
v. Training to
regulatory and market participants.
• To increase competitiveness of the capital market, regulator should monitor irregularities like insider trading as well as fraud and strict legal provisions against such activities.
• Investment-friendly policies to attract
foreign and institutional investors.
• Financial reports of companies should be prepared and disclosed as per the accounting standard set by ICAN. Also, ICAN should be empowered to give regular training to employees of industrial, business and financial institutions.
• Investor protection fund is important for investors’ confidence in the capital market. Sebon should formulate legal provision to establish such a fund and Nepse should manage it.
• Training to brokers for increased skill and
knowledge of portfolio management.
• To correctly calculate base price after issuance of rights and bonus shares, it’s better to implement transaction tax instead of capital gain tax. Two per cent transaction tax seems better as it can collect more revenue than current 15 per cent capital gain tax.
• Transaction tax will also prevent fraud and irregularities in collecting revenue from the capital market. Transactions
will also increase because as the trading volume
increases the total amount of revenue will also increase. .
• The proposal to
privatise Nepse was submitted at the Ministry of Finance on Poush 1, 2064. It is essential to privatise Nepse as per ‘Privatization with Demutualization’ concept.
• Derivative market
by rights share renounciatione
• Entry of foreign
companies on securities business
• Tax on interest on government bond should be uniform
• New act and regulation to boost institutional investors
• Policy for investment of Non Resident Nepalese (NRN) in capital market
Singh is managing director of Nepal Stock Exchange (Nepse)