By NKIRUKA NNOROM
Shareholders under the aegis of Association of Avid Shareholders, AAS, have called on the Federal Government to hasten the implementation of removal of Value Added Tax, VAT, and stamp duty from secondary market transactions, saying this will speed up actualisation of the Nigerian Stock Exchange, NSE’s $1 trillion capitalisation target by 2016.
Speaking on behalf of the members, the president, Mr. Abayomi Obabolujo, said that continued delay is not in the best interest of the market as it is capable of eroding investors’ confidence and discouraging foreign portfolio investment.
He also called on the Securities and Exchange Commission, SEC, to consider charging commission on traded securities based on ‘per transaction’, rather than on percentage basis, saying this is what is obtainable in other climes.
The Minister of Finance and Coordinating Minister for Economy, Dr. Ngozi Okonjo-Iweala, had late last year while announcing forbearance for 84 stockbroking firms, said that the Federal Government has also approved removal of VAT and stamp duty on stock market transactions, as part of measure to support the capital market.
According to her, taxes on stock exchange transactions fees are as high as 12 percent, “much higher than in other jurisdictions, and these constitute a major disincentive to invest in the Nigerian capital market.”
“I will like to announce that the Federal Government has consented to waive the 0.075 percent stamp duties payable on stock exchange transaction fees; and to exempt from VAT, commissions: (a) earned on traded values of shares, (b) payable to the Securities and Exchange Commission (SEC), and (c) payable to the Nigerian Stock Exchange (NSE) and the Central Securities Clearing System (CSCS); by including these commissions in the list of VAT-exempt goods and services,” she stated.
Obabolujo, therefore, noted that for the government not to have implemented the measure one year after, showed its level of insincerity towards capital market affairs.
He said, “Continued delay in implementation of removal of VAT and stamp duty on secondary market transaction is unfair to investment and investors. On the part of government, it shows that they are not true to their words. When you make pronouncement, it is only fair that you follow it up with action.
“This will indirectly be jeopardising foreign portfolio investment and even foreign direct investment into the country as the foreign investors will begin to see the government as not being sincere. By this, the government is not only discouraging investment in the capital market, but also destroying investors’ confidence.”
“Now, if the NSE said it is targeting $1trillion market capitalisation by 2016, the least the government should do is to support it, by fulfilling its promises, starting with the implementation of VAT and stamp duty removal,” he added.
“As a matter of fact, the Securities and Exchange Commission, SEC, should begin to look at charging commissions on secondary market transaction based on ‘per transaction’ instead of charging on percentages.
In other climes, commissions are charged per transaction regardless of volume of transaction; SEC should think of replicating this in Nigeria. It makes equity investment attractive,” he enthused.
He noted that for the stock market to be attractive and grow, charges must be low, saying, “if an investor sells shares, he is charged commission based on percentage on shares sold, whether he makes losses or not; this is discentive to investment. But if the commission they are removing is negligible, an investor can still take the loss and sell the shares.”