The government has been urged to avoid short-term tax policies in the upcoming budget for the financial year 2021-22 to ensure a stable economic environment and provide an opportunity to investors to plan their investments. In its proposals for the budget 2021-22, Pakistan Stock Exchange (PSX) said that as much as favourable tax treatment, investors need a stable and predictable tax environment. While making a long-term investment decision, the investors need to know what tax treatment their investment will receive over the term of their investment horizon. Otherwise, they may simply decide not to invest or adopt short-term trading strategies. It should also be considered that the changes in policies should be prospective rather than retrospective in nature. One of such examples is the amendment made in the section 65B of the Income Tax Ordinance, 2001 through Finance Act 2019 where tax credit for investment in plant and machinery for the purpose of balancing, modernisation and replacement was reduced from 10 percent to 5 percent retrospectively of the amount invested. Therefore, the stock exchange proposed to rectify all such amendments which have retrospective effect so that all the amendments made have a prospective effect. It further said that the government must move away from short term measures and frequent changes to tax treatment and adopt long term measures to promote savings and investment and development of the capital market.