KARACHI: Pakistan Stock Exchange (PSX) has recommended elimination of minimum tax regime for listed companies in order to promote documentation in the country.
The PSX in its proposals for budget 2021/2022 recommended the elimination of minimum tax regime for listed companies. It said that though the concept of minimum tax is prevalent in a few other countries, however, in other countries, as a principle, it is levied only in cases where high-income taxpayers don’t pay any tax due to different tax exemptions available to them.
The PSX proposed that minimum tax regime should be eliminated from listed companies as such companies are strongly compliant towards specific documentation requirements of various statutes.
Giving rationale to the proposal, the stock exchange said that the application of minimum tax on listed companies has resulted in discouraging documentation of the economy.
Listed companies have significant documentation and regulatory requirements and need to engage external auditors to audit their business affairs.
The stringent regulations keep the listed companies strongly compliant towards filing of income tax / sales tax returns, paying quarterly advance taxes, adjustment of withholding taxes on sales and purchases and consequently filing withholding statements, statements on final taxation and fulfilling various other requirements which resultantly align their books of accounts with the statutory requirements and provide a comfort zone to the authorities and stakeholders over the reported numbers.
However, the levy of minimum tax puts downward impact on the earnings of listed company despite having current and brought forward losses.