IT ministry concerned over end to tax break

Warns of flight of capital and brain drain as freelancers get tax notices

ISLAMABAD:

The Ministry of Information Technology and the IT industry have raised serious concern over the withdrawal of tax exemptions and notices sent by tax commissioners to freelancers.

The IT ministry has warned of flight of capital and brain drain from the country due to the end to the tax holiday. It also voiced concern over the notices sent to the freelancers by the tax commissioners.

A meeting was apprised that the immediate reaction of IT/ITES and freelance sector to this policy change could be in the form of flight of capital and brain drain from the country.

Furthermore, the IT ministry team presented case studies of MNCs, Pakistani IT companies and freelancers to sensitise the Federal Board of Revenue (FBR) policy team about the recent tax notices and wrong interpretations by the tax commissioners.

On the directive of IT minister, IT Secretary Shoaib Ahmad Siddiqui called on FBR Chairman Asim Ahmad and his team at the FBR headquarters on Monday.

The ministry leadership presented a detailed industry impact analysis as a result of recent announcements of the FBR to abolish the tax exemptions and replace them with a tax credit regime.

The IT secretary highlighted the government’s remarkable achievement in the form of IT/ITES export figures as Pakistan was expected to reach the landmark of $2 billion in export remittances this year.

He emphasised that the IT sector was the high priority for the prime minister and the ministry was leading this agenda to implement it with all available resources to ensure the facilitation of IT/ITES and freelance sectors in the country.

P@SHA Chairman Barkan Saeed and IT sub-task force chair Syed Ahmed raised concern over the FBR’s decision of including the IT/ITES sector into the tax credit regime, without taking the Ministry of IT and IT industry on board.

It was highlighted that all the hard work would be reversed as policy inconsistency never sent a good signal to the domestic and international investors.

It was emphasised that the IT/ITES and freelance sector was only surplus service with a highly positive impact on job market and economic growth in the country.

Tax consultants also highlighted the complexities around extra documentation of IT/ITES sector and freelancers due to the tax credit regime, which could result in an increased cost of doing business, especially for the new entrants.

The FBR chairman assured them that concerns of the IT/ITES sector would be addressed. The FBR and IT ministry agreed to conduct joint workshops for the IT/ITES and freelance sector to facilitate the industry in tax matters.

Published in The Express Tribune, May 25^th, 2021.

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