IT sector calls for tax exemptions

Urges government to invest in skill development to boost economy

Usman Hanif June 07, 2023
P@SHA proposes allowing 100% forex exchange retention in foreign currency accounts and 100% repatriation, as the industry is highly dependent on and operates in US dollars. Photo: file


The Information Technology (IT) industry is urging the government to implement tax exemptions that will yield high returns, while also calling for funds to be allocated for skill development. The sector sees itself playing a pivotal role in boosting the national economy and is placing significant emphasis on increasing exports and nurturing local talent to create a thriving technological landscape.

Pakistan Software Houses Association (P@SHA), Chairman, Muhammad Zohaib Khan highlighted the need for tax exemptions in income tax, tax on dividends, capital gains, and profits during a meeting with the Prime Minister of Pakistan. Khan projected a potential 30% growth in exports for the IT industry in the upcoming year, provided the sector receives its fair share of incentives.

Khan emphasised the government’s recognition of the IT industry’s potential for growth and stated that the government should allocate over Rs13 billion in the finance bill for the IT sector.

He outlined that the allocated funds should primarily be invested in human resources and skills development, infrastructure development, promoting the soft image of ‘Brand Pakistan’, and enhancing the capacity of the tech ecosystem in the country.

The government has been urged to allocate a significant budget for promoting IT education and skill development programs nationwide to meet the growing demands of the local market, create job opportunities, and alleviate poverty.

Efforts should be made to provide incentives and facilities to the IT industry and freelancers to enhance their contributions to the economy, attract foreign exchange, and promote knowledge and technology transfer.

Furthermore, Khan called for capacity-building boot camps, workshops, and the promotion of IT education in institutes, aligned with international standards.

Noman Said, Convenor of the Federal of Pakistan Chamber of Commerce and Industry (FPCCI) on the ICT Committee, stressed the importance of establishing dedicated IT institutes and colleges in major cities with advanced equipment, competent faculty, and upgraded curricula.

It is estimated that nearly 90% of the IT workforce comprises of males. However, considering the nature of certain jobs, such as creative roles, female IT professionals’ output is often more productive.

Pakistan Freelancers Association (PAFLA), CEO, Tufail Ahmed Khan highlighted the uptick in demand for freelancing brought on due to increasing unemployment and inflation. He underscored the need for subsidies to aspiring freelancers for internet access, skill development programs, and international certification to encourage both male and female professionals to enter the freelancing field.

Founder and CEO of Integration Xperts, one of the leading technology firms in Pakistan, Umair Azam highlighted the potential of the IT sector to contribute to the national economy, not only through direct job creation and inflows but also by improving the efficiency and profitability of local organisations, which will generate more revenues for the government. He said that the IT sector has continually contributed more to the GDP over the past 10 years, which currently stands at 1%, with the potential to significantly increase both GDP contribution and exports in the next few years.

The P@SHA chairman also expressed concerns about foreign exchange retention in the IT industry. P@SHA proposes allowing 100% forex exchange retention in foreign currency accounts and 100% repatriation, as the industry is highly dependent on and operates in US dollars.

Khan also acknowledged the idea of special technology zones (STZs) and suggested that benefits meant for STZs should directly support IT and ITeS companies. He also emphasised the need for single window operations, virtual licenses, and the strengthening of provincial authorities in the same domain.

Regarding financing, Khan recommended the introduction of cash rebate schemes for the IT industry, including a 5% rebate on export income. He also urged the government to prioritise export refinancing schemes with discounted interest rates at least 10% lower than the prevailing key policy rate of 21% set by the State Bank. These measures would improve access to finance for IT exporters, rationalize the cost of doing business compared to international competitors, and enhance the country’s ease of doing business score, he said.

Published in The Express Tribune, June 7th, 2023.

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