PSX proposes 20% tax credit to boost IPO listings in FY25 budget

June 06, 2024 (MLN): To encourage companies to engage in an IPO and list on the Exchange, the Pakistan Stock Exchange has proposed to the Ministry of Finance (MoF) and the Federal Board of Revenue (FBR) that they lower the tax rates by giving a tax credit of 20% in the upcoming budget for the fiscal year 2024-25.

The local bourse has raised concerns that companies in the Asian region are taxed at 19.8% whereas in Pakistan the corporate tax rate is 39% including super tax.

In this context, it has proposed to lower tax rates by giving tax credit that meets the prescribed requirements including a minimum free float of 25%.

This will result in higher tax revenue from listed companies along with increased documentation and transparency once listed, as well as higher revenue from CGT.

PSX further said that tax credits are essential for small savers, especially salaried class, to promote long-term savings for their retirement and other life goals.

These savings are channeled towards the stock market and government securities.

Withdrawal under Finance Act 2022 of tax credits available to individual investors for investment in new shares, mutual funds, sukuks, and life insurance policies has diverted public funds towards undocumented sectors.

To counter this situation, PSX has proposed to reinstate Section 62 of the Income Tax Ordinance that was removed in the Federal Budget 2022-23. This step will promote savings for the taxpayers with no major impact on revenue.

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