Karachi, April 14, 2024 – Brokers at the Pakistan Stock Exchange (PSX) are making a plea for a more lenient tax framework on brokerage and commission as the country prepares for the 2024-25 budget.
Their appeal stems from concerns regarding recent legislative adjustments that have impacted their operations.
In a formal communication addressed to Abdul Rehman Warraich, Commissioner of the Securities Market Division at the Securities and Exchange Commission of Pakistan (SECP), brokers have outlined their reservations about the current taxation structure and its effects on their industry.
The association underlined the repercussions of recent legal modifications that have led to an increase in taxes on brokerage and commission income, ultimately dampening the functioning of brokerage firms. Particularly, the removal of advance tax under Section 233A of the Income Tax Ordinance, 2001, inadvertently activated tax provisions under Section 233, obligating brokerage firms to withhold advance tax at a steep 12 percent rate, significantly impacting their financial performance.
Brokers argue that a reduction in the tax rate on brokerage and commission payments would yield manifold benefits. Not only would it ease the financial burden associated with conducting business, but it would also stimulate growth within the stock market.
In a separate correspondence directed to Akif Saeed, Chairman of the Securities & Exchange Commission of Pakistan, stock brokers reiterated similar sentiments. They stressed the disproportionate strain placed on brokerage companies due to the high advance tax rate, currently set at 12 percent, and advocated for its reduction to a more equitable rate of 2 percent.
SECP officials have been urged to take these taxation concerns into account in the budget proposals for the Federal Budget for FY2025 and to extend relief to stock brokers. The letters underscore the critical necessity for regulatory intervention to alleviate the financial stress on brokerage firms and create a more conducive operational environment within the capital market.
Brokers argue that a reduction in brokerage taxes would not only alleviate escalating business costs but also invigorate growth and investment within the stock market. The proposals put forth by brokers aim to tackle the inherent challenges posed by the current tax regime and call for a revision of tax policies to ensure a level playing field for brokerage firms, thereby promoting the sustainability of the capital market ecosystem.
The SECP is now tasked with deliberating on these proposals and evaluating their potential implications for the broader financial landscape. The outcome of these discussions will bear significant consequences for the profitability and competitiveness of brokerage firms in Pakistan, as well as for the overall vibrancy of the country’s capital market.
