Investors, issuers in capital markets: MoF initiates consultations to review tax-related issues

ISLAMABAD: The Tax Policy Office of the Ministry of Finance has initiated consultations to review tax-related issues affecting investors and issuers in Pakistan’s capital markets, aiming to rationalise the tax framework and explore incentives to boost market participation.

A consultative meeting of the Capital Market Development Council (CMDC), chaired by Federal Minister for Finance and Revenue, Muhammad Aurangzeb, was held on Wednesday to review progress on reforms aimed at strengthening Pakistan’s capital markets, with particular focus on the development of the corporate debt market and expanding the role of capital markets in financing economic growth.

Aurangzeb underscored that a strong and well-functioning capital market is vital for sustainable economic development, as it enables corporations to access long-term financing while offering diversified investment opportunities to both institutional and retail investors.

He emphasised that Pakistan must gradually move towards a more balanced financial system where capital markets complement the banking sector in meeting the financing needs of the economy. The Finance minister noted that the development of a vibrant corporate bond market would play a critical role in mobilizing long-term domestic savings and supporting private sector investment.

Sources revealed that the introduction of a mechanism for fixed-rate instruments was highlighted. It was informed that recent amendments in PO Regulations 2017 allow the price discovery of profit rate in case of fixed rate instrument and spread in relation to KIBOR, and discounted instrument. PSX has developed the book building mechanism whereby corporates can raise debt through a competitive bidding process, sources added.

Highlighting the need for practical and time-bound reforms, the Finance minister stressed that stakeholders must address bottlenecks across the entire value chain of the capital market, including issuance processes, regulatory procedures, market infrastructure, and secondary market liquidity. He emphasised that reforms should focus on creating an enabling environment where companies can efficiently raise capital through market-based instruments while investors benefit from greater transparency, liquidity, and confidence in the system.

During the meeting, the Finance minister emphasised the importance of strengthening awareness and communication regarding recent regulatory reforms introduced to facilitate corporate bond issuance and improve market access. He directed the Securities and Exchange Commission of Pakistan (SECP) to enhance outreach efforts to ensure that corporates, financial institutions, and market participants are fully informed about the simplified regulatory framework, reduced documentation requirements, and other facilitation measures introduced in recent months.

The Finance minister also highlighted the need to draw lessons from international and regional experiences in capital market development and asked relevant institutions to review best practices in neighbouring markets that could be adapted to Pakistan’s context. He stressed that improving market infrastructure and trading activity would be essential to strengthening investor confidence, particularly through the development of effective market-making mechanisms and improved liquidity in the secondary market for corporate debt instruments.

The meeting also discussed policy measures aimed at encouraging companies to utilise capital markets more actively for raising funds as an alternative to traditional bank borrowing. The Finance minister noted that deepening the corporate bond market would help diversify financing sources for businesses while reducing excessive reliance on bank lending.

Another important area highlighted during the meeting was the need to review the tax framework affecting capital market participants. The Tax Policy Office of the Ministry of Finance has initiated consultations to examine tax-related issues impacting both investors and issuers, to rationalize the tax structure, and explore possible incentives that could promote greater participation in the capital market.

Representatives of the Pakistan Stock Exchange (PSX), Securities and Exchange Commission of Pakistan (SECP), State Bank of Pakistan (SBP), Central Depository Company (CDC), National Clearing Company of Pakistan Limited (NCCPL), Pakistan Banks Association (PBA) and Pakistan Business Council (PBC) briefed the meeting on recent initiatives undertaken to facilitate the issuance of corporate bonds and improve market functioning.

Participants highlighted that several regulatory reforms have already been implemented, including simplified prospectus requirements, streamlined documentation procedures, reduced regulatory fees, and digitization of the issuance process to improve efficiency and transparency.

Copyright Business Recorder, 2026