Karachi: The Pakistan Stock Exchange (PSX) has put forward an important budget proposal for 2021-22 to promote economic growth and resolve major structural imbalances in the Pakistani economy. The stock market is one of the most well-documented areas of the economy. All capital market participants have complete documentation; therefore, the development of the capital market is fully in line with FBR’s efforts to expand Pakistan’s tax base.
An efficient, fair and broad-based tax system is interdependent with a corporate culture. In addition, a broad-based capital market can help achieve important economic and social goals, such as increasing the number of taxpayers, increasing savings and investment rates, and reducing wealth inequality.
Fiscal discipline and taxation measures have a direct and far-reaching impact on the structure and function of the capital market. A large and well-functioning capital market is a prerequisite for a modern economy. Therefore, there is an urgent need for Pakistan’s economic growth to create a favorable environment, which will help attract more companies and investors to enter the capital market.
The core principle of the 14 recommendations put forward by PSX is to increase the size and depth of the capital market by encouraging new listings and increasing the investor base, without affecting government revenue. All recommendations basically focus on obstacles and inhibitors that adversely affect the development of the capital market and the documented corporate sector.
The main purpose of these proposals is to eliminate the unfavorable factors that hinder capital formation and double taxation, sometimes even multiple taxation, which is not conducive to capital formation, which is essential for our corporate sector to effectively compete worldwide. Most proposals are income-neutral and in many cases may increase government revenue.
Some of the key points in the budget proposals include
1. Reform of CGT
2. Rationalisation of tax rates of listed companies and SMEs.
3. Introduction of Savings and Investment Accounts
4. Documenting the real estate sector and promotion of REITS
5. Introduction of long term and consistent tax policies