PSBA Raises Concerns Over Tax Amendment’s Impact on Stock Market

The Pakistan Stockbrokers Association (PSBA) has raised concerns regarding the potential negative impact of a proposed tax amendment on the stock market and investors. In a letter to Senator Aurangzeb dated January 3, 2025, the PSBA warned that implementing the amendment without proper consultation could harm the investor community.

The Tax Laws (Amendment) Bill, 2024, introduces several changes to the Income Tax Ordinance, 2001, including a new section, 114C. This section restricts economic transactions by certain individuals or associations of persons. It specifies that entities authorized to sell securities, such as debt instruments or mutual fund units, cannot transact with ineligible individuals unless the investment falls within a limit defined by the Federal Board of Revenue (FBR).

The PSBA urged the finance minister to convene a meeting with stakeholders to discuss the amendment’s implications and find solutions that preserve market integrity while meeting policy goals.

Speaking to Business Recorder, PSBA CEO Bilal Farooq Zardi revealed that 30-40% of investors in securities and mutual funds are non-filers. He stressed that existing laws allow all investors, including non-filers, to trade freely and expressed optimism about potential relaxations in the amendment.

Experts believe the amendment primarily targets mutual fund investments, as non-filer participation in the Pakistan Stock Exchange (PSX) is minimal. Tahir Abbas, Director Equities at Arif Habib Limited, confirmed that nearly all PSX investors are filers. Muhammad Awais Ashraf, Director Research at AKD Securities, explained that while basic investment accounts may involve some non-filers, upgrading to large accounts requires filing status. He added that the PSBA’s concerns appear focused on mutual fund investments by individuals