DOHA: The Advisory Council is all for taxing foreign stock investors on capital gains and income earned from cash dividends and interest on bonds, treasury bills and debentures.
In a bold step, the Council yesterday rejected a proposal by the government to exempt foreign investors in the local equity market from paying the above tax.
The State Cabinet had, on February 19, 2014, approved a draft law that sought to allow foreign stock investors, including individuals, corporates and institutions, the above exemption.
The Cabinet had argued that the exemption would help increase the inflow of foreign funds into the Qatari equity market from individuals and institutions such as hedge, pension, investment and mutual funds.
After it received the draft law from the State Cabinet, the Council referred it to its internal Financial and Economic Affairs Committee for review.
The Committee approved the draft and sent it back to the Council, which took it up for a debate at its session yesterday.
The Council objected to the Committee’s approval of the draft and asked it to take a fresh look at it and amend three articles.
The Speaker of the Council, H E Mohamed bin Mubarak Al Khulaifi, at the end of discussions on the issue, noted that foreign investors make huge profits on the robust Qatari equity market.
Many of these investors exit after making profits, without benefiting Qatar’s economy in any way. They are able to earn profits because the Qatari government provides them the opportunity and a safe environment for investment and various other facilities. But the government doesn’t benefit in the process.
The Speaker argued that given the situation, non-Qatari stock investors should be treated as foreign owners in Qatari companies whose stakes are limited, as they must have a Qatari partner.
And they must pay tax on their share of profit.
“So, when we tax a non-Qatari owner of a Qatari company or industry, why should we exempt a stock investor from tax on profits he makes through capital gains or income from dividend or interest on debt instruments,” asked the Speaker. Such exemptions would dampen the spirit of commercial and industrial entities that have foreign partners and would not boost the local equity market.
Rashid Al Madadi, the council’s members taking part in the debate earlier, said income tax was one of the main sources of revenue for countries around the world. It is true that state revenue sources here are oil and gas and income from investment. But taxes must also be part of state revenues, he said.
Members Hamid Al Ahbabi, Mohamed Al Sulaiti and Zabin Al Dosri opposed the Cabinet’s proposal. Recommendations are to be sent back to the Cabinet.
Foreigners are taxed at the rate of 10 percent on their share of annual profits earned through their part ownership in Qatari commercial and industrial firms. THE PENINSULA