ISLAMABAD : The Pakistan Stock Exchange (PSX) and the Pakistan Stock Brokers Association (PSBA) have raised concerns regarding the high taxation in the capital market, urging for its rationalization in their budget proposals.
Highlighting the recent surge in the PSX’s performance and the substantial increase in market capitalization by nearly Rs4 trillion in the outgoing fiscal year, the PSX emphasized the need for tax reforms to sustain this growth trajectory.
Foreign inflows of $132 million have been injected into the country through the stock market in the current fiscal year, indicating investor confidence in Pakistan’s economic prospects.
In its proposals, the PSX advocated for aligning Capital Gains Tax (CGT) rates on listed securities with those on the sale of immovable property to eliminate tax-driven distortions among asset classes and ensure a level playing field.
Additionally, the PSX recommended aligning CGT rates on all derivatives and future contracts with those on commodity contracts traded on the Pakistan Mercantile Exchange (PMEX). It also called for rationalizing dividend tax rates and reinstating tax credits on investment in shares to promote long-term savings and investment in the stock market.
Furthermore, the PSX urged the government to focus on documenting the real estate sector and promoting Real Estate Investment Trusts (REITs) structures to encourage transparency and investment diversification.
Echoing similar sentiments, the PSBA emphasized the need to reduce the tax rate on brokerage and commission payments, currently standing at 12 percent. The association also urged the Federal Board of Revenue (FBR) to expedite the release of tax refunds to brokers.
Expressing opposition to the Sindh Sales Tax (SST), the PSBA argued that it amounted to double taxation for brokers based in Lahore and Islamabad, who were not subject to the tax jurisdiction of the affected areas.
To incentivize listing on the stock exchange, the PSBA proposed lower tax rates for listed companies compared to non-listed entities. This, they argued, would stimulate industrialization and corporate growth in the country.
Overall, both the PSX and PSBA underscored the importance of tax reform to create an enabling environment for investment, promote economic growth, and enhance the competitiveness of Pakistan’s capital market.