Karachi, March 22, 2024 – The Pakistan Stock Exchange (PSX) has put forward a significant proposal aimed at bolstering the small and medium enterprise (SME) sector in the country.
The proposal suggests a substantial reduction in the tax burden for SMEs listed on the stock exchange, offering a 50 percent tax credit on their payable taxes for a period of three to four years.
In its recommendations for the upcoming budget of 2024-25, the PSX highlighted the pivotal role played by SMEs in Pakistan’s economy. SMEs are recognized as major contributors to employment, exports, and overall GDP growth, constituting a staggering 80 percent of all employment opportunities in the nation.
The PSX emphasized the manifold advantages of a robust SME segment within the stock exchange framework. Beyond merely accessing growth capital, listing on the exchange fosters documentation, promotes good governance practices, fuels entrepreneurial activity leading to job creation, and enhances investment opportunities for both domestic investors and local venture capitalists.
To further incentivize SMEs to seek listing on the SME Board, an initiative recently launched by the PSX, the proposal suggests a substantial tax reduction for listed SME companies. Under this plan, these entities would benefit from a 50 percent tax credit on their payable taxes for the initial three to four years following listing, with a subsequent reduction to 20 percent thereafter.
Explaining the rationale behind the proposal, the PSX underscored the disproportionate contribution of SMEs to job creation compared to large-scale industries. While the manufacturing sector, dominated by larger enterprises, accounts for only 14 percent of total employment, SMEs generate over 80 percent of all jobs in the country. This highlights the critical role SMEs play in fostering inclusive economic growth and employment opportunities.
Moreover, the PSX pointed out that various countries across the globe, including Spain, Kenya, Brazil, Argentina, among others, have implemented similar fiscal incentives to support SMEs. These initiatives have proven to be instrumental in driving SME growth, fostering innovation, and stimulating economic development.
The launch of the SME Board by the PSX represents a concerted effort to provide smaller companies with an alternative avenue for financing their expansion and development projects. By facilitating access to capital markets, the SME Board aims to unleash the growth potential inherent within Pakistan’s vibrant SME sector, ultimately contributing to broader economic prosperity and sustainable development.
The proposal put forth by the PSX underscores the importance of proactive measures to support and nurture SMEs, recognizing them as the backbone of Pakistan’s economy. If implemented, the proposed tax credit scheme has the potential to galvanize SME participation in the stock exchange, unlocking new avenues for growth and prosperity in the years to come.
