Advisory body opposes new IT taxes

Fears taxes will force freelancers and startups to park earnings abroad

ISLAMABAD:

Members of the Prime Minister’s Advisory Council on IT and Digital Economy have suggested to the government not to impose any new taxes and enforce new procedures for information technology, freelancers, e-commerce and startups, fearing a significant part of their earnings will be parked abroad. A preliminary meeting of the advisory council was held at the Ministry of IT and Telecom on Friday.

The huddle was chaired by Minister of IT and Telecom Syed Aminul Haque while Minister of Finance Miftah Ismail, Special Assistant to Prime Minister on Youth Affairs Shaza Fatima, IT Secretary Mohsin Mushtaque Chandna and others attended the meeting. In a recent address to the nation, Prime Minister Shehbaz Sharif announced that the IT sector, being a key part of government strategy, would impart training and develop skills among the youth in order to tap the full potential of IT exports. The advisory council will send its report to the prime minister for approval.

Council members proposed that there should not be any new taxes and procedures for IT, freelancers, e-commerce and startups to facilitate digital transformation and growth in exports. Otherwise, the IT industry stakeholders will be forced to park a significant part of their earnings abroad, which will cause losses to the national exchequer.

IT and IT-enabled services (ITeS) were the fastest growing areas that would help grow Pakistan’s foreign currency reserves, therefore, the government should ensure ease of doing business and policy continuity as much as possible, the members said. It may be noted that none of the budget proposals submitted by the telecom sector were considered and instead federal excise duty (FED) on telecom users was increased from 16% to 19.5%. Apart from that, the regulatory duty on import of optic fibre cable was raised from 10% to 20%, undermining the fibre laying plans of the private sector and the government-led Universal Support Fund (USF).

The laying of optic fibre cables is a key step if the government wants to realise the Digital Pakistan vision. During the meeting, the advisory council members stressed the need for ensuring consistency in government policies, which could be attractive for the domestic and international investors. Federal IT and Telecom Minister Syed Aminul Haque highlighted that for expanding the country’s digital economy, it was necessary to solve problems of the IT and telecom industry and provide maximum relief. PM Shehbaz has also shown special interest in promoting the IT industry, he said.

The IT minister constituted three committees tasked with promoting IT export, personal data protection and telecom sector growth. The committees will finalise their recommendations within a week and present reports to the prime minister, who is the chairman of the advisory council. Council members also discussed China-Pakistan Economic Corridor (CPEC) projects related to IT and telecom as well as broadband services in the unserved and under-served areas to provide digital solutions at the micro level.

Proposals floated by the IT and telecom stakeholders were discussed extensively, which included how to expand the digital economy by identifying key areas of growth, the challenges and the way forward to overcome the challenges. While underscoring the need for consistency in government policies, the advisory council pointed out that the industry and investors were undecided due to the changing situation, which hurt efforts to promote the digital economy. Required support from the State Bank of Pakistan (SBP) and the Federal Board of Revenue (FBR) was not forthcoming, it noted. IT Minister Haque said that the purpose of constituting the advisory council was to formulate workable proposals to address the issues facing the IT and telecom industry, make the industry more functional and issue the required directives.

“When all stakeholders/ institutions are on board and issues are resolved in a timely manner, there is no reason the industry cannot become the backbone of the economy and lead the country out of the economic crisis,” the minister remarked. “It is important to provide relief for the IT and telecom industry to increase IT exports and to enhance the digital economy.”