Pakistan Strategy_An overview of proposed tax amendments, (AKD Daily, Mar 15, 2021)
AKD Daily Pakistan Strategy: An overview of proposed tax amendments · The Govt. is likely to push forward the second Income Tax Amendment bill in the coming days, purportedly to save ~PkR140bn (0.3% of GDP) in income tax exemptions/reductions, which would be effective from Jul 1, 2021. · However, our initial assessment suggest authorities would be able to generate ~PkR44bn (0.1% of GDP) additional revenue from the said amendments, needing to rely on other budgetary measures in order to meet FY22’s FBR target of PkR6trn (11.75% of GDP vs. FY21E: 10.3%). · From market’s vantage, abolishment of intercorporate dividends for conglomerates such as ENGRO which have stake in subsidiaries between 55-100% (7% earnings impact) would be negative while introduction of 25% tax credit for greenfield expansion would be positive for players such as KOHC and FCCL. We believe amendments would be neutral for the IT Sector. · While the recent correction (down 6.7% in the days leading to Senate Chairman election) has opened valuations, near term outlook is dependent on developments relating to fiscal targets and inflationary pressure led expectation on interest rate hikes. With regards to latter, rising COVID cases, and stable external account outlook could push Central Bank to hold interest rates, in our view. We continue to like Cements, Steel and Construction-Allied where top picks include LUCK, DGKC, MLCF and MUGHAL. AKD Research
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AKD Securities Ltd. caters to a diversified group of domestic and international institutional investors, high net worth individuals and upscale retail clients, including expatriate Pakistanis. With high quality research, unparalleled execution and distribution capability for both regular and large block trades, AKD Securities Ltd. has earned an outstanding reputation in the Pakistani securities industry.Outside of commercial banks, AKD Securities Ltd. is one of the biggest capital market firms in the country. AKD Securities is the leader in raising and providing risk capital in underwriting, market making and mergers and acquisitions in Pakistan. Good corporate governance and professionalism are emphasized throughout the firm and AKD Securities Ltd. is amongst the very few companies to have introduced a firm-wide comprehensive CODE of ETHICS, overseen by an independent compliance manager.Ultimately, our success is based on the quality of service we provide to our customers and the trust and confidence reposed in us by them. Our focus, therefore, remains on customer satisfaction at all levels in the company.
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