Pakistan's private equity plan has a $10 billion target but no published tax rate
The finance minister's committee met on 26 October to shape rules for private equity funds. It has named the investors it wants, and the tax treatment that would decide whether they come is still unpublished.
The committee drawing up Pakistan's private equity rules has told investors it wants $10 billion to $15 billion. It has not told them what a fund will pay in tax, and that is the figure a manager needs before committing money.
The committee held its third meeting on 26 October, chaired by Finance Minister Muhammad Aurangzeb, according to the Associated Press of Pakistan. The prime minister's adviser on privatisation, the finance secretary and the chairman of the Federal Board of Revenue attended, with members from public and private institutions. The State Bank told the meeting it has raised the limit on how much a bank may put into a single private equity fund from 10 percent to 20 percent.
The dollar target, a plan to finalise the framework within two weeks and a place for the legal changes in the finance bill for 2027 to 2028 come from ProPakistani's report of 28 October, not from the official release, which gives no figure. That timetable points to mid November, and the same report says regulatory changes could begin straight after, without waiting for the budget.
Pass through tax
The official account says the committee examined treating private equity funds as pass through vehicles, with tax charged on the investor rather than the fund, and compared international tax models. It also covered fund structures and transparency, how banks and other institutions can take part, and a pipeline of acquisitions, consolidations, new projects and exits over five to ten years. The domestic sources of money it named are banks, insurers, mutual funds, pension schemes, development finance institutions, companies and family offices.
Aurangzeb said mobilising domestic capital "should be the immediate priority", with foreign institutions and co investors to follow later, and that tax arrangements must not allow tax arbitrage. The work began this summer: the prime minister asked on 3 August for a roadmap for a private equity fund, and a second meeting followed on 3 September.
The magazine's analysis
Tax decides whether the target is credible. A fund taxed on its profits, whose investors are then taxed on what it pays out, loses a layer of return. Pass through treatment removes the first layer. But the committee has published no rate and no definition of tax neutral, so a manager cannot yet model a single deal.
The bank limit is a smaller lever than it looks. The release does not say what the 20 percent is measured against, and a limit only matters if banks want to use it. A lender earning a comfortable return on government paper has little reason to tie money up in an illiquid fund unless the tax outcome makes the wait pay.
The nearest precedent is the property trust market, where bank investment grew from Rs22 billion in 2021 to more than Rs280 billion, more than twelve times as much. That shows a rule change can move bank money, though real estate trusts hold buildings that produce rent, a simpler product than a buyout fund.
Whether any of this reaches startups depends on exits, which the release does not mention. The framework is due in mid November.
