Photo credit: PNGX
A new revised and market friendly transaction levy will be charged on all transactions on the PNG National Stock Exchange (PNGX).
Robert Minak, executive chairman of Papua New Guinea's Securities Commission (SCPNG), made the announcement.
“We have reviewed the existing levy rate of O.75 per cent and we believe that the quantum of that levy is too high and will disincentivise investors and therefore market activity.
“After meaningful consultation with relevant industry stakeholders we concluded that it was necessary to significantly ease the rate,” Mr Minak said.
“Levies are proposed as a way to raise government revenue.
But levies can harm market quality by unnecessarily burdening the economy by distorting investor’s capital allocation in reducing trade volumes, increase volatility and adversely affect price discovery”.
While weare required by law to retain a levy, its rate needs to reflect PNG’s current market conditions,” he added.
SCPNG is required by section 44(1) of the Securities Commission Act 2015 (SCA) to maintain a levy and to pay a portion of it to the Capital Market Development Fund under section 429(a) of the Capital Market Act 2015 (CMA).
As a result of the combined effect of such measures, the legislative trajectory anticipates that portions of the levies will eventually be transferred to the Capital Market Development Fund.
SCPNG agrees that any taxes imposed under section 44(1) SCA should be used to promote market development rather than as a source of revenue for the government.
The Capital Market Development Fund should be utilized for the levies of market development (CMDF).
For the time being, SCPNG admits that all of the levies are tied to capital market growth in order to provide the market with every chance to expand.
The Securities Commission has implemented meaningful governance control and transparency over the levy setting procedures, levy review mechanisms, and projected levies spending based on the findings of the review.
In the next months, the governance infrastructure and administrative system will develop.
They might include things like reporting on actual spending to industry and rebating taxes that haven't been spent.
This newly updated rate will take effect two months after the gazettal is published.
Any prior levies collected by a stockbroker or participating organization based on the now-revoked rate (0.75%) must be refunded to buyers or sellers within 14 days.
“The reviewed rate is a significant decrease (96 per cent) from the rates presently in effect.
“SCPNG hopes these changes will ease stakeholder concerns, maintain market quality and lead to restoring confidence in the market generally,” Minak said.
Reference: Post-Courier (1 October 2021). “Stock Exchange Rates To Be Eased”.
