Pakistan's listed companies contribute nearly 25% to overall tax collection

Companies listed on the Pakistan Stock Exchange (PSX) made stellar contribution to the country's direct tax collection component in first half of current fiscal year with a share of almost 25% (PKR 687 billion).

According to the data, the tax deposit of listed companies in the first half of the current fiscal year recorded a growth of 10% compared with same period last year.

The overall direct tax collection in the country rose to PKR 2,780 billion, reflecting a 29% increase compared to same period in the preceding year.

The listed companies' tax collection share was around 25%.

The total tax collection in calendar year 2024 reached PKR 10,470 billion, reflecting an increase of 27% compared with 2023. The direct tax collection alone surged 33% to PKR 5,160 billion compared with a year ago.

Muhammad Javed Iqbal, research analyst at Arif Habib Ltd., said that in 2024, the 100 companies listed at the benchmark KSE-100 index collectively contributed PKR 1,220 billion in direct taxes, up 2.2% on year-on-year basis making up 23.6% of total direct tax collection.

He said that auto assemblers led the charge with a sharp 62% increase, followed by fertilizers at 19%, banks at 12%, investment banks at 15%, textile composite at 10%, and cement at 9%.Meanwhile, some sectors registered a decline, with refineries posting the steepest decline at 47%, followed by chemicals at 30%, OMCs at 27%, and E&Ps 18%.

Banks

The year 2023 proved to be a taxation rollercoaster for banks. Initially, banks were required to maintain a 50% ADR to avoid penal taxes of 10%-16% on investment income.

However, a late-year policy revision turned up the heat. By year-end, the corporate tax rate for banks surged from 49% to 54%, factoring in a 10% super tax. With this, the sector posted a 12% jump in tax contributions compared with 2023.

E&P companies

A 35% growth was witnessed in fiscal year 2024-25's first half (1HFY25). The sector benefitted from the reversal of depletion allowance taxation in 1HFY24, a factor absent in 1HFY25, amplifying its tax charge in the latest period.

Fertilizer companies

With urea and DAP prices soaring 39% and 9% YoY, respectively, the fertilizer sector witnessed a profitability surge in 2024. This boost in pre-tax earnings translated into a 19% YoY increase in tax collection.

Cement companies

Lower interest rates in 1HFY25 provided a cushion for cement manufacturers, enabling them to rake in higher taxable income. As a result, the sector's tax charge expanded by a solid 34% YoY.

OMCs

A decline in retail price of petrol and diesel squeezed sectoral revenues and, in turn, tax obligations of OMC sector. Hence, the sector's tax contributions slipped by 10% in 1HFY25.