PSX shares drop amid budgetary concerns M Haris

Shares at the Pakistan Stock Exchange (PSX) experienced a significant drop on Thursday, with the benchmark KSE-100 index falling by 356.50 points, or 0.48%, closing at 73,862.93 points from the previous close of 74,219.43.

Topline Securities CEO Mohammed Sohail attributed the bearish trend to investor concerns over possible tax increases on dividends and capital gains, which are dampening market sentiment.

AKD Securities’ Director of Research, Muhammad Awais Ashraf, highlighted the anxiety among investors regarding potential budgetary changes. “The looming budget could see a hike in the Capital Gains Tax rate, increased taxes on dividend income, and the removal of exemptions for mutual fund and insurance investments,” he said.

Next Capital Limited’s Director of Research, Shahab Farooq, noted that political uncertainties and concerns about budget measures led to reduced trading activity and persistent investor jitters.

A pre-budget report by Topline Securities, released on June 1, speculated that the government might raise taxes on dividends, capital gains, and interest income to meet its high tax revenue targets. The report warned that changing these taxes from final to normal status could negatively impact stock market investors’ net returns. It explained that under such changes, capital gains and dividend income would be taxed as part of individuals’ total income (including salaries and business income), which could lead to higher tax burdens due to a lack of deductible expenses.

A prior Dawn report indicated that both the PSX and the Pakistan Stock Brokers Association (PSBA) had voiced their concerns over high capital market taxation, urging for more rational tax policies in their budget proposals. Among their key demands is the alignment of Capital Gains Tax (CGT) rates on listed securities with those on immovable property, which would help eliminate tax-driven disparities across asset classes and ensure a fairer investment landscape.