Karachi, May 5, 2025 – The Pakistan Stock Exchange (PSX) has submitted a formal recommendation to the government for the upcoming federal budget 2025-26, calling for the removal of the minimum tax regime for listed companies.
This suggestion comes as part of PSX’s broader tax reform proposals aimed at encouraging documentation and easing the regulatory burden on corporates that already operate under strict oversight.
In its proposal, the PSX highlighted that while the concept of minimum tax exists in some international jurisdictions, it is typically imposed only in cases where high-income taxpayers exploit excessive exemptions to avoid paying taxes altogether. By contrast, listed companies in Pakistan operate under rigorous documentation and audit requirements, and are already among the most compliant segments of the economy.
The PSX argued that the continuation of minimum tax on compliant listed companies discourages formalization of the economy. These companies are required to submit comprehensive financial reports, undergo external audits, file income and sales tax returns, pay quarterly advance taxes, manage complex withholding tax obligations, and provide regular statements to tax authorities. This extensive compliance infrastructure ensures that listed companies maintain transparent, well-audited financial records that align with statutory requirements and regulatory expectations.
Despite these obligations, the imposition of a minimum tax means that listed companies must pay tax even in periods where they incur financial losses or have brought forward losses from previous years. This not only undermines profitability but also serves as a disincentive for companies to list on the stock exchange or continue operating in the documented sector.
To rectify this, the PSX has proposed a targeted amendment to the Income Tax Ordinance, 2001, that would exempt listed companies from the minimum tax regime. This, they argue, would promote capital market growth, reward compliance, and create a more equitable tax environment for corporates operating transparently within the formal economy.
The proposal is part of ongoing dialogue between regulatory bodies and the government aimed at creating a more investment-friendly and efficient tax framework in Pakistan.