Super gains tax on T-bill trades
View(s):The government is gearing to introduce a withholding tax (WHT) or a super gains tax on Treasury bill trading for primary dealers.
The Business Times learns that a withholding tax of 10 to 20 per cent is being mulled by the government from realised profit through trading in Treasury securities. “This will be in addition to the corporate and other taxes T-bill trading is currently liable to. This proposed WHT is likely to be a final tax,” a source told the Business Times.
He added that Inland Revenue (IR) will have to separate security trading and slap the tax on the profits / realised gains through trading in Treasury securities.
Some analysts say securities are targeted with this tax as the Domestic Debt Optimisation (DDO) did not have a haircut on the coupon and the interest rate or maturity extension on the tenures.
The inverted yield curve persists after the DDO as does its effect on the economy. “The instruments were bought at high interest rates, over 25 per cent, and given the fact that no haircuts at all through the DDO, current holders/dealers are now liquidating them at huge premiums. The government will isolate government security trading and slap the tax,” the source said adding that the modalities will involve either taking out the portfolios, trading etc and separately bringing in the tax for them raising, tax collections. “The collections will go up on T-bills already sold this year,” the source added.
He said that the unit working on this was surprised that there was no haircut on government securities through the DDO.
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