The Pakistan Stock Exchange (PSX) has set its sights on tax relief measures in the upcoming budget for the fiscal year 2024-25, aiming to pave the way for increased foreign investment in the country’s capital market.
With the goal of enticing foreign investment into the capital market, the proposal put forward suggests exempting income derived from foreign investment from taxation. This move is seen as vital for stimulating foreign interest in Pakistan’s capital market, thereby injecting much-needed liquidity and vitality into the economy.
Outlined in its tax proposals for the forthcoming budget, the PSX emphasized the importance of attracting foreign investment to shore up dwindling foreign exchange reserves. Citing a recent government initiative aimed at providing tax exemptions for non-resident banking companies investing in government debt securities such as treasury bills and Pakistan Investment Bonds (PIBs), the PSX underscored the need for a similar incentive in the capital market arena. The exemption of profit, debt, and capital gains from such debt instruments for non-resident banking companies, as per the clauses laid out in the Income Tax Ordinance of 2001, is considered a significant step towards bolstering investor confidence and fostering economic growth.
Advocates of the proposed tax relief measures argue that they would not only invigorate the struggling economy but also instill renewed confidence among local investors. This renewed confidence is anticipated to translate into increased participation in the capital market, thereby generating positive outcomes in terms of tax revenue.
Offering further rationale for the proposal, the PSX highlighted the potential benefits of injecting foreign investment into the country’s foreign exchange reserves. By exempting capital gains and dividend income derived from foreign investment in the capital market from taxation, the PSX envisions a scenario where both foreign and local investors are encouraged to engage more actively in the market. This, in turn, is expected to stimulate taxable activities within the capital market, leading to a subsequent increase in tax revenue.
In light of these considerations, the PSX has urged the government to enact appropriate amendments to the Income Tax Ordinance of 2001. Such amendments would align with the tax relief measures already in place for investments in government securities, thereby creating a level playing field and fostering a conducive environment for both domestic and foreign investors alike.
As the country braces for the fiscal challenges ahead, the PSX’s call for tax relief measures underscores the critical role that foreign investment plays in driving economic growth and stability. With the potential to unlock new avenues of investment and spur economic activity, the proposed tax incentives represent a strategic opportunity to propel Pakistan’s capital market onto a trajectory of sustained growth and prosperity.
