KARACHI, April 29, 2025 — The Pakistan Stock Exchange (PSX) has recommended the removal of the flat 12.5% Capital Gains Tax (CGT) rate on the disposal of listed securities acquired between July 1, 2013 and June 30, 2022.
In its budget proposals for FY2025–26, the PSX has urged the government to apply a uniform CGT structure across all securities, similar to the one applicable on those acquired after June 30, 2022.
The PSX emphasized that aligning CGT rates across acquisition periods would help address tax-driven distortions among asset classes and lead to a more efficient allocation of capital. It argued that the current structure incentivizes investment in real estate, where CGT on long-held property can drop to 0%, while securities remain subject to a fixed 12.5% tax regardless of holding period.
“This discrepancy defies the principle of tax neutrality and discourages long-term investment in listed capital markets,” the PSX stated. The exchange added that the policy favors speculative investment in real estate, drawing in undocumented wealth and inflating property prices.
The issue, the PSX noted, had previously been addressed in the Finance Bill 2022, where CGT on securities was proposed to be based on holding periods—mirroring the taxation method applied to immovable properties under Section 37(1A) of the Income Tax Ordinance. However, the final Finance Act 2022 introduced a proviso under Section 37A that reinstated the 12.5% flat CGT for securities acquired between 2013 and 2022, thereby reversing the intended tax uniformity.
“This last-minute change was not part of the original Bill and undermines the extensive consultations held with stakeholders, including the then Finance Minister and FBR Chairman,” the PSX said. It argued that the insertion of this proviso was unanticipated and contradicts the principle of consistent tax policy.
Under the current regime, CGT rates differ significantly across asset classes. For example, if a security purchased in July 2013 is sold today, the gain is taxed at 12.5%. In contrast, if an immovable property acquired in the same month is sold now, the CGT is zero. This inconsistency, according to PSX, distorts investor behavior and limits capital market development.
The PSX also highlighted the poor CGT collection from capital markets in recent years. In FY2023, CGT revenues stood at just Rs19.4 billion, and in FY2022, only Rs6.1 billion. With carry-forward losses of Rs221 billion available for adjustment against future gains, CGT collection is expected to remain weak unless reforms are implemented.
Furthermore, the PSX argued that rationalizing CGT would encourage documentation of the economy, particularly in the real estate sector, which has historically been a haven for untaxed wealth.
Reiterating its stance, the PSX called on the government to remove the anomalous proviso and adopt a consistent CGT framework that treats gains from all securities equally, regardless of acquisition date—ensuring tax fairness and boosting investor confidence in the capital markets.