Markets turn over, ask for tax of choice

Banks and primary dealers are expected to hold a separate meeting shortly with the finance minister on the impact in the bond market.

The brokers presented three alternatives:

• Single transaction tax for FIIs and NRIs in the place of capital gains tax and exemption from the transaction tax to all other categories of investors.

• Domestic investors be given an option of only transaction tax or capital gains tax.

• Exempt debt market and day traders from the tax and impose the tax on other categories of investors including FIIs, FIs and retail investors. The brokers appeared content after the hour-and-a-half-long meeting with the finance minister and the Sebi chief. Addressing reporters, Dina Mehta former BSE president and a leading broker said, “We have explained to the FM the profile of the investors and various communities in the market. There cannot be a flat rate of the transaction tax. Investors who are not getting any short-term and long-term benefit cannot pay such a huge burden.”

Mehta stressed the brokers didn’t suggest any alternative numbers to the FM, but gave him the overall impact of the transaction tax.

The finance minister refused to say anything, citing Parliament being in session. And all Sebi chief G N Bajpai said was that he “Was just a listener in the meeting”.

When asked whether the day traders would continue their agitation by staying away from the market, Mehta said that there is no agitation as such and they would participate in the market. “However, volumes would continue to be low and this is expected” she added.

According to the presentation made by the brokers to the FM, the proposed 0.15 per cent transaction tax would result in sharp decline in the volumes of trade in both securities and debt market and result in only Rs 1,035 crore mop-up in tax revenues as against the budget target of Rs 3,500 crore. They argued that, in countries like US, UK, Canada, Japan and Germany, there is no transaction tax but only capital gains tax.