Taxing YouTubers

The FBR's latest formula to tax YouTubers, based on number of views secured, may be one of the most incoherent bits of rulemaking in the tax collector's history. The proposed policy sets taxes as high as 66% on certain overseas Pakistani content creators, all because of the unawareness of the fact that YouTube does not pay content creators a flat rate. Incomes can vary massively, with most content only making as little as $1 per 1,000 views, while the highest rates, which are rarely paid out, can go past $30 per 1,000 views. That is a huge range - between Rs276 and Rs8,350 at current exchange rates. Meanwhile, YouTube Shorts only pay between Rs111 and Rs167 per 1,000 views, meaning the tax would theoretically be higher than revenue.

The application of a flat tax alone is proof that the actual work of formulating variable rates, which are reasonable across the board, was not done. Questions also arise over the legality of the tax, which is being applied to overseas income for work done abroad. Among other things, the tax would apply to "interactions" with Pakistani users, but since viewing YouTube content is usually free - with the exception of some subscription content - creators do not make money off a viewer unless an ad is shown during an interaction. Ad rates can vary widely, and some ads might not be monetisable in Pakistan, leaving the creator with nothing. It is not unreasonable to assume that some creators may lose money by making their content accessible in Pakistan.

Also, because the creators are foreign-based, earning in foreign currencies, and may have no physical presence in Pakistan, the only way to collect from them may be through YouTube itself, and that would put this new approach up against European and American courts, which are unlikely to allow their residents to be subjected to such a convoluted tax. Instead of taxing views, the FBR should focus on taxing Pakistani YouTube ads, which represent actual revenue generated in Pakistan, and expending more energy on taxing 'agriculturalists', real estate moguls and others who pay little to no taxes on income worth billions.