Pakistan’s Stock Market Declines on Worries over Tax Increases in Upcoming Budget
Published on: June 8, 2024.
Filed under:
Pakistan’s benchmark stock index experienced a slight decline of 0.15% on Friday due to concerns about tax hikes following the government’s announcement of the annual budget date. The KSE-100 index closed at 73,754.01, dropping 108.92 points from the previous close of 73,862.93.
The annual budget, which was originally scheduled for earlier in the week, will now be presented on June 12. This delay comes as Islamabad is in discussions with the International Monetary Fund regarding a potential loan.
There have been speculations about a 45% tax on dividend and capital gains, but Mohammed Sohail, the CEO of Topline Securities, took to social media to explain that the actual effective tax rate may be lower. He pointed out that banks, for example, can adjust their income tax in order to lower the tax burden. Sohail also mentioned that high-net-worth individuals-led corporations may be able to decrease their tax liability by increasing their accounting expenses.
In other news, Pakistan’s central bank is expected to lower its key interest rate by 100 basis points in the upcoming week. This move comes after keeping the rate at a record 22% for seven consecutive policy meetings.
Market analysts believe the recent decline in the stock index is a response to reports of higher taxes, as the government aims to meet the revenue measures suggested by the IMF. Investors are choosing to book capital gains at a 15% tax rate before June 30, rather than potentially facing the speculated marginal tax rate of up to 45%.
Despite the recent decline, the KSE 100 index has shown significant growth in the past year, with a 12% increase year-to-date and a 72% increase over the last 12 months.
Source
