An export tax on information technologies hinders the potential of young people


CARACHI:

IT industry professionals and experts have expressed concern that the proposed tax on IT exports in the FY23 budget will largely hamper the earning potential of young people.

Out of the 9.5 trillion rupees federal budget, 6,331 million rupees has been allocated to the IT and telecommunications division, while 5,716 million rupees has been earmarked for science and technology under the Public Sector Development (PSDP).

In addition, 17 billion rupees have been allocated to provide computer training, provide young people with laptops, improve networks and promote computer exports, as well as a grant of 1,000 million rupees for the Pakistan Software Export Board ( PSEB) for the promotion of IT exports.

In addition, a tax of 0.25% was imposed on export earnings of computer software or computer services through the 2022 finance bill.

“The new tax on the IT sector will discourage exports and will also discourage businesses and freelancers from bringing in foreign funds,” SI Global CEO Noman Ahmed Said told The Express Tribune.

“A similar thing happened a few years ago which caused damage and that too will certainly impact the growth of the IT sector.”

“The 0.25% tax revenue is a meager amount for the government, but it will certainly hurt young people, who are just starting to make their presence felt,” he said.

“The performance of the IT sector has been exceptional over the past few years, but this cannot be taken for granted as various factors have contributed to the better performance of the sector.”

Alpha Beta Core (ABCore) CEO Khurram Schehzad said the tax “is not good for documentation”.

“One of the purposes of the tax is to document and encourage taxpayers to file returns. This measure may not produce the expected results for the documentation.

ICT expert Parvez Iftikhar said the previous government’s 100% tax credit scheme for income from the export of IT and IT services had been replaced by the 0.25% tax on export earnings from these services.

“This ratio will generally be 25% to 30% of their profits, which means that IT companies will stop bringing their profits to Pakistan.”

Furthermore, recommendations from the telecommunications industry were not only ignored, but additional taxes were also imposed on smartphones and the FED on services was increased.

Startup investment expert Kapeel Kumar said the overall budget was a reflection of inflation and the miseries of the common man. “High taxes and inflation will have a negative impact on the productivity of
IT sector.

The government “must come up with measures to improve the IT industry because we currently have billions of dollars of potential,” he said.

The field of IT has huge potential and “we need to focus on harnessing this long-term growth potential,” Said noted, adding that Pakistan currently has 600,000 IT professionals with exports of 2 billion dollars, which shows the importance of the sector.

“Although Pakistan is growing at a rapid pace and has the highest year-on-year IT growth in the region, internet access is still the lowest,” he pointed out and said. stressed the need to solve the problem.

The growth of Internet access and mobile subscriptions in Pakistan was not aligned with the quality of service, said the CEO of SI Global. Coverage of 4G services and broadband subscription also remained low compared to neighboring countries, he added.

He argued that so far, no grants or subsidies have been introduced for tech startups, while the program has also not been revised based on industry needs.

Published in L’Express Tribune, June 17e2022.

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