Karachi, May 3, 2025 – The Pakistan Stock Exchange (PSX) has put forward a key proposal to promote the listing of Small and Medium Enterprises (SMEs) on its platform by offering major tax incentives.
In its official tax recommendations for the upcoming federal budget 2025-26, PSX has suggested that the government provide a 50% tax credit to SMEs that list on the exchange’s SME board. According to the proposal, the tax credit should apply for the first 3 to 4 years after listing, followed by a 20% tax credit in the years after. The goal is to reduce the tax burden and encourage smaller companies to join the formal financial market.
The PSX explained that the manufacturing sector currently provides just 14% of total employment in Pakistan. This is partly because large-scale industries, despite receiving 80% of industrial investments, contribute less than 20% of the sector’s jobs. In contrast, SMEs generate more than 80% of the country’s employment, yet they lack the support needed to grow and expand.
To support this point, PSX cited examples from countries like Spain, Kenya, Brazil, and Argentina, where governments offer various tax credit incentives to support SME growth through capital markets. These models have proven successful in increasing employment, innovation, and economic development.
The PSX emphasized that SMEs play a vital role in Pakistan’s economy by contributing to exports, job creation, and overall GDP. Providing them access to funding through the capital market would help them grow faster, adopt better corporate practices, and attract both local and foreign investors.
To help achieve this, PSX has already established the Growth Enterprise Market (GEM) board—a dedicated platform for smaller companies seeking listing. This board offers SMEs an alternative to traditional bank loans, making it easier for them to raise capital for new projects and business expansion.
If approved, this tax credit proposal could create more transparency in the economy, promote innovation, and unlock investment opportunities for a wide range of local entrepreneurs. The move could also strengthen PSX’s role in supporting Pakistan’s long-term economic growth.