KARACHI: Pakistan’s stockbrokers have urged the government to introduce tax‑free investment accounts in the forthcoming federal budget, asserting that the measure could draw millions of new investors and channel savings into the formal economy.
The proposal was presented by the Pakistan Stock Brokers Association (PSBA), which is targeting a record 16 initial public offerings (IPOs) in the next fiscal year and aims to expand the Pakistan Stock Exchange (PSX) investor base from approximately 565,000 to 2.5 million within two years.
“Our proposal is to introduce a tax‑saving account, similar to models used worldwide—in Japan, the USA, the UK—known as an Investment Savings Account,” said Bilal Farooq Zardi, the association’s chief executive officer, speaking to Arab News ahead of the government’s June 10 budget announcement.
Prime Minister Shehbaz Sharif’s administration is working to revive the economy under an International Monetary Fund (IMF) loan programme that demands reforms to raise revenue and broaden the tax base.
According to Zardi, an Investment Savings Account would allow individuals to invest in equities while enjoying tax exemptions on capital gains and dividend income up to a defined threshold. Similar schemes are employed in several countries to encourage savings and market participation.
“If introduced, we could attract low‑income groups, students, housewives, widows and retirees, because this model has proven successful globally,” he added.
The association believes the measure could shift household savings from assets such as real estate and gold into productive investments that support businesses and economic growth.
“It would be advantageous if we could capture just 10 percent of that wealth,” Zardi said.
The PSBA is also seeking reforms to Pakistan’s capital gains tax (CGT) regime, which currently imposes the same rate regardless of the holding period, discouraging long‑term investment.
“When we talk about real estate, there are exemptions after three to four years. But in the stock market, whether the holding period is one month, one year, five years or fifty years, we still pay 15 percent,” Zardi explained.
He called for lower tax rates on shares held for longer periods, arguing that such incentives would boost investment in listed companies and strengthen capital markets.
“High tax rates drive investors away, harming the Federal Board of Revenue’s revenue and hindering industrialisation and stock‑market development,” he said.
Zardi also urged a review of dividend taxes, noting that the current system creates multiple layers of taxation before profits reach investors.
Additional proposals include abolishing taxes on bonus shares, simplifying customer verification under anti‑money‑laundering rules, reducing taxes on brokerage services, and lowering the corporate tax rate for listed companies.
The association expects a record number of companies to raise capital through stock‑market listings next year.
“This year we have facilitated 12 IPOs and next year, God willing, we aim for 15‑16,” Zardi said.
He reiterated the goal of increasing the PSX investor base fivefold over the next two years.
“Today, our investor base stands at 565,000; we aim to reach 2.5 million,” Zardi added.
PSX Chief Executive Officer Farrukh H. Sabzwari did not respond to requests for comment on the upcoming budget.
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