The stock market has reacted negatively to proposals for a capital gains tax on shares.
It is a sound principle to require capital gains made from selling shares to be taxed. Investors who place their savings in bank accounts are taxed on their interest income. It is only fair that others who invest their savings in stocks, are appropriately taxed on their capital gains.
One reason for resistance is that changes will need to be made for the proposal to be implemented. Brokers will have to share information about all trades executed so that the capital gain (or loss) on each sale by each investor can be calculated.
The system will have to ensure investors are only taxed on their net capital gains, when they sell their stocks at a higher price than the purchase price. It will also need to account for capital gain losses.
There is no technical barrier preventing brokers and stock exchanges from undertaking this task, which is standard practice in many countries and can readily be managed by IT systems.
For one thing, improved information sharing will make it easier to monitor and track manipulation of the market and insider trading. The tax will also help make all stock market investors think more long term and less likely to simply use the market for speculation.
Making the changes should be seen as part of fulfilling the government policy to strengthen the country’s capital markets by updating their operations and rules.