MP 🇵🇰 🇵🇸

There are rumours that #Pakistan will increase its CGT on equities..a few thoughts on that which I hope Mr @CMShehbaz at least listen to. For years we have repeatedley calling for #Pakistan to ABANDON its counterproductive capital gains tax, and replace it with a turnover based tax like #Vietnam has (10bps when selling). Much simpler to collect, would result in significantly more tax revenue to the FBR, and - most importantly - make the administrative hurdles for foreign investors bearable. Vietnam today turns over 500-1000 musd on a daily basis, vs Pakistan 50-100musd. When we started investing in Vietnam back in 2013 turnover was 100-200 musd a day. It takes about 1-2 months for a new foreign investor to get access to Pakistani equities, and the major hassle is the monthly tax collection where a local tax advisor is required. Latest figure on total collected CGT indicates around US 10m annually. Is it worth making life hard for foreign investors for that kind of money? Well, in Pakistan it is. Then they wonder why so few foreign investors arrive... Why should the state care about the equity market you might ask, if it is so tiny? "We want BIG projects". Well, because it is the starting point for valuation of unlisted investments. If the equity market is trading at P/E 4x, this means implicitly that the minimum required rate of return for equity markets investors is 25%. That becomes the floor for unlisted investments (which carry a higher risk premium). Why not do what you can to improve valuations before slumping away state assets? Pakistan's absolutely biggest problem is the structural BoP deficits. Thus they should do everything they can to increase their export base, and make the market more attractive to Foreign Direct Investment. There will come foreign investment but what will the required returns on these investments be? In #India it is below 10%, in Pakistan...north of 30% I would guess. Again - Why not trying to maximize the attractiveness of your country and thereby fetch higher valuations for the big projects? I really hope sanity prevails on this one. Abandon the CGT for foreign investors once and for all.