PSX Proposes Elimination of Minimum Tax Regime For Listed Companies in Budget 2023-24

Pakistan Stock Exchange (PSX) has proposed to eliminate the minimum tax regime for listed companies in next year’s budget.

PSX in its budget proposals asked the Federal Board of Revenue (FBR) to eliminate the minimum tax regime for listed companies in next year’s budget.

The minimum tax regime should be eliminated or reduced for listed companies as such companies are documented and compliant with specific documentation requirements of various statutes, the bourse mentioned in its budget proposals.

PSX suggested the FBR introduce Capital Gain Tax (CGT) rates on listed securities in line with CGT on the sale of immovable property. This is essential to eliminate the tax-driven distortion between different asset classes. In addition, CGT on all derivatives and future contracts traded on PS in line with future commodity contracts traded to PMEX, it further proposed.

PSX asked to offer tax relief to foreign investors in terms of exemptions on capital gains and dividends earned on such investment, in line with similar tax relief offered for investment in GoP securities in order to attract and encourage foreign investment into the capital market.

PSX also proposed reinstatement of the repealed section 65C of the Income Tax Ordinance, 2001 amended to allow tax credits to certain companies meeting the prescribed requirements of 25% free float, which will generate CGT and other tax revenue.

In order to encourage small and medium enterprises to get listed on the SME Board, it is proposed that the rate of tax for such listed SME companies be lowered by giving a tax credit of 5096 of tax payable for 3 to 4 years and onwards of the tax payable.

The Exchange also requested to reinstate Section 62 of the Income Tax Ordinance that was removed in the Federal Budget 2022-23 to promote saving for the taxpayers with no major impact on revenue.

PSX has also proposed that in order to encourage companies to list, their tax status should be grandfathered at the time of listing application i.e. no new cases for past tax returns should be opened, except for such pending cases on which proceedings have already been initiated under the Ordinance, before the date of listing application, will continue as per the provisions of law.

It is proposed that the Government of Pakistan Introduce a mechanism and regulatory structure for the launch of RSIAs or ISAs to help channel savings toward productive investments. These schemes will help channel capital that is invested in unproductive areas and from the large undocumented sector into productive parts of the economy.