Ishaq Dar Refuses Tax Exemption On IT Exports

Islamabad: The government of Pakistan has rejected the IT industry’s proposal to waive “negligible tax” on its services to support the industry’s declining exports. However, the government has agreed to provide as much support as possible, including exemption from tax authorities’ audits.

On Sunday, the finance minister Ishaq Dar in a meeting of the IT sector highlighted the issue. He said the effective tax rate on the industry was only about 0.25% which was “peanuts”. He added that people must develop the habit of paying taxes instead of seeking exemptions. Furthermore, Mr Dar said a tax of Rs 2.5 on exports worth Rs 1,000 is “nothing”.

However, Ishaq Dar promised that IT professionals who export their services would not get any tax notice from the Federal Board of Revenue(FBR). Moreover, their tax returns would not be audited to minimize revenue costs.FBR will make a unit where dedicated officers will facilitate handling refund and tax credit cases for the IT sector. The decision will help to make things easier for people.

Finance Miniter Ishaq Dar is the chairman of the Prime Minister’s task force on Information Technology and Telecom. IT minister Syed Aminul Haque, Shaza Fatima Khuwaja, a Special Assistant of the prime Minister (SAPM) on Youth Affairs. Tariq Bajwa SAPM on Finance, State Bank Governor Jameel Ahmed, were also a part of the meeting. Finance Secretary Hamid Yaqoob Shaikh, IT Secretary Mohsin Mushtaq including the chairpersons of the FBR. The Pakistan Telecommunication Authority also participated.

On the expiry of the tax of the tax holiday to the IT sector, the PML-N government under former Prime Minister Shahid Khaqan Abbassi replaced the IT tax break with 0.25 PC full and final tax. However, this will not be executed due to the tax authorities’ issue. In comparison, tax notices started flowing to top-ranking companies like S&P Global.

In the 2021-22 budget, the government reduced the advance income tax for the sector from 12% to 10%. The government promised to decrease 8% in the coming fiscal year. Whereas the spectrum sales and other expansions increased, the FBR also increased the advance income tax to 15% in December 2021 mini-budget. The IT sector and the ministry claimed that it had paralyzed the industry.

The IT ministry advocated an export reward scheme that will facilitate software and IT export services at the rate of at least 5-% since they were low-wage professionals. The decision will encourage the professionals as their income proceeds for rewards. IT specialists are unhappy with the FBR’s practices that a policy enables 35% of export earnings for marketing. Unlike industrial commodities, Outlets in countries like Singapore, Dubai and other Middle East destinations may help to proceed IT exports. The government may face trouble distributing 5G spectrum licenses in this situation.