ISLAMABAD, May 27: The Securities and Exchange Commission of Pakistan (SECP) has forwarded its budget proposals related to taxation regime aimed at providing relief to the capital market, corporate sector and the non-bank financial institutions.

The proposals aim at achieving documentation of economy by reduction in corporate tax rates, promote saving culture through mutual fund and pension funds and to encourage the holding company structure.

`However, the main purpose is to remove irritants and provide a level-playing field for different sectors within the SECP`s regulatory ambit,` the spokesman of the Commission said.

He said that it was the responsibility of SECP to foster harmonious development of corporate sector and capital markets.

The proposals have been forwarded to be incorporated in the 2013 Finance Act, and the Commission believes that if these were implemented through removal of fiscal irritants, the restrictions to the growth of capital markets, corporate and NBFC sectors would diminish.

`It is needed to encourage these sectors to make an equitable contribution to the government exchequer for overall development of the country too,` the SECP has said in the proposal forwarded to the FBR.

The SECP has stressed for reduction in corporate tax rate to encourage growth ofcorporate sector and documentation of economy in line with the international taxation trends.

The SECP has proposed to the FBR a gradual reduction in the corporate tax rates, private company, unlisted public company and a listed company with simultaneous increase in the tax rate of Association of Persons (AOPs).

Further, fiscal incentive for listed companies is proposed to distribute dividend the rate of tax in case a listed company not distributing a minimum of 30 per cent of its after tax accounting profits of the year as dividend, will be 3pc higher than the normal tax rate for listed companies.

In order to encourage consolidation of core resources of corporate business groups through functional holding companies and to expand the scope of `group relief` and `group taxation` under the 2001 Income Tax Ordinance, the SECP has recommended to allow offsetting the accumulated loss of preceding three tax years, subject to the condition that the surrendering company ownership for last three tax years prior to the formation of the group is as provided under the tax law.

It is also proposed to increase the time period allowed for surrender and adjustment of the surrendered losses from existing three years to five years, and to reduce the ownership condition of 100pc shareholding in the subsidiary company by the holding company, to 90pc in case the subsidiary company being a listed company,undergoes delisting and becomes a nonlisted company.

The present law provides the facility of additional tax credit under the Voluntary Pension System, if investment is made after 40 years of age, only up to June 30, 2016. It is proposed that the same may be extended for a period of five more years.

A reduced tax rate on import value of gold at Rs25 per 10 grams instead of existing rate of 1pc is proposed, provided gold is imported by a corporate member for trading at the commodity exchange to make legally imported gold competitive with illegally imported gold.

In order to increase financial inclusion and outreach in the country, the tax credit is proposed to be extended to asset management companies on incurring expenditure on the establishment of branch offices or sales offices outside the cities of Karachi, Lahore, Islamabad and Rawalpindi.

`The SECP considers these proposals to be significant since the implementation of these would help documentation of the economy, stimulation of capital formation and also encouraging long term savings,` the proposal concluded.

However, similar proposals forwarded last year for the budget 2012-13, where the SECP had stressed for reducing the corporate tax were rejected by the FBR on the grounds the country needed higher tax collections and there was limited space for low tax regime.