Pakistan’s Securities and Exchange Commission of Pakistan (SECP) has submitted a set of budget proposals to the Federal Board of Revenue (FBR) for the upcoming 2024-25 fiscal year. These proposals aim to incentivize investment in the stock market and real estate, while also reducing the tax burden on stockbrokers.
Key Proposals:
- Align Capital Gains Tax (CGT) Rates: The SECP recommends aligning the CGT rates for the sale of securities (stocks, mutual funds) with those applicable to immovable property (real estate). This aims to create a more balanced playing field between different asset classes.
- Reinstate Tax Credits: The SECP proposes bringing back tax credits for investments in initial public offerings (IPOs), equity mutual funds, and exchange-traded funds (ETFs) held for five years. This aims to encourage long-term investments and promote a culture of saving in regulated sectors.
- Lower Tax Rate for Stockbrokers: The SECP seeks a separate tax clause with a lower rate for brokerage and commission fees paid to brokers registered with the Pakistan Stock Exchange (PSX). This aims to reduce the cost of doing business for brokers and potentially facilitate capital market growth.
SECP’s Rationale:
- Promoting Investment: Reinstatement of tax credits and aligning CGT rates could incentivize individuals to invest in the stock market, potentially leading to increased market participation and economic activity.
- Encouraging Long-Term Investments: Tax credits for long-term holdings in stocks and funds could promote a more stable and sustainable investment environment.
- Supporting Stockbrokers: Lower taxes for brokers could translate into lower fees for investors, making the stock market more accessible and attractive.
- Discouraging Undocumented Wealth: Aligning CGT rates between asset classes might encourage the documentation of real estate transactions, potentially broadening the tax base.
Looking Ahead:
The FBR will review the SECP’s proposals alongside other budget recommendations. The final decision on their implementation will depend on the government’s overall fiscal strategy. However, these proposals highlight the SECP’s commitment to fostering a more vibrant and accessible capital market in Pakistan.
