PSX for addressing structural imbalances

The Pakistan Stock Exchange (PSX) has presented budget proposals for fiscal year 2021-22 aimed at boosting economic growth and addressing key structural imbalances in Pakistan’s economy.

According to a statement issued on Thursday, the PSX presented 14 proposals targeted at increasing the size and depth of the capital market by incentivizing new company listings and increasing the investor base, without impacting government revenues.

The proposals mainly focus on the impediments and disincentives that are negatively impacting the development of capital market as well as the documented corporate sector.

“The recommendations are primarily designed to remove the disincentives and the incidence of double, and at times multiple, taxation that are penalising capital formation, which is essential for the corporate sector to be able to compete effectively around the world,” the statement added.

Some of the key points in the budget proposals included reform of capital gains tax (CGT), rationalization of tax rates for listed companies and SMEs, introduction of savings and investment accounts, documenting the real estate sector, promotion of REITs and introduction of long-term and consistent tax policies.

“Recent changes in the CGT structure for real estate and construction have created a tax-driven distortion between listed and other asset classes, where the CGT rate is very high for listed investments,” the statement mentioned.

A reduction or a time-bound elimination of CGT would be a major incentive to attract new local and foreign investors, without any significant loss of tax revenue, and would increase tax revenue in the medium term, it said.