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IT Taxation Issue raised with FBR and Finance Ministry by MoITT

The Ministry of Information Technology & Telecom is going to tackle

The issue of the withdrawal of tax exemption from the IT sectors and IT-enabled service sector. Such as the sectors of the Federal Board of Revenue (FBR) and Ministry of Finance to alter the proposed tax through the Amendment Bill 2021 submitted to the National Assembly Secretariat.

On Monday while addressing a news conference at the Islamabad Press Club, Burqan Saeed gives a statement, who is the Chairman Pakistan Software Houses Association. He said that the concerned Ministry, IT Task Force, IT industry, and any stakeholder wasn’t consulted or informed before taking such an enormous step for hampering the expansion of the IT sector. Furthermore, the industry has written a letter to the FBR to offer time for this significant export sector. Thus the Ministry of IT’s also confirmed that it might approach the FBR for reversal of their decision.

Moreover, He requested the Prime Minister of Pakistan: Imran Khan that he should intervene and must stop the authorities from imposing the taxes on the IT exports via the Bill that has proposed.

Burqan Saeed also regretted such an issue by saying that it is not a good fortune that the FBR has not taken any input from the IT sector or relevant Ministry before taking such a serious anti-export measure. Such kind of sudden act will stop the new investment and definitely resulted in a decrease in the export sector of IT.

President and CEO InfoTech Private Limited, Nadeem A Akhtar said that such kind of sudden changes in tax policies wouldn’t only daunt the new investors. However, it would also cause colossal damage to the expansion of the trajectory of existing players as well.

Not like the traditional export sectors (for instance, Textile or others), the IT Sector, is that the only sector which never asked for or availed any kind of subsidies, incentives or rewards. For instance, they never ask for a reduction in electricity and gas tariff or cash rebates. Furthermore, Nadeem added that it will put a negative impact on IT exports growth.

Burqan commented that a complex kind of tax crediting system that is going to introduce will result in unnecessary documentation for the IT sector. The Commissioner Inland Revenue also shared the same kind of views regarding this. Furthermore, there is no doubt that under the draft Bill, such harsh conditions of documentation are asked that it might not be possible to hunt decrease from the tax officials. Possibly, the IT sector would start receiving notices like other sectors.

If we refer to the conditions of the decrease the scheme, he said that the conditions like filing off the condition for filing the tax returns and withholding statements haven’t any link with the IT exports. The IT sector is already facing heavy taxation at the time of input, this can clearly be noticed by keeping this report in view; that 19.5 % provincial nuisance tax, 12.5 % advance tax, and 10 % activation charges that were promised to be reduced gradually. No doubt that IT’s Ministry and other ministries are quite supportive and have given futuristic challenges, which are being faced by the IT sector.

He stated that the IT service sector has given record export growth even during the pandemic with a 40 % increase in the year 2019-2020. Besides the on target to exceed 2 billion dollars by the top of this fiscal year. No doubt, that is it’s understood that the passage of the Finance Bill within the same form would stop the IT sector from gaining the said targets.

He urged Prime Minister I.K for taking immediate action, and invite industry stakeholders to debate our concerns, and discourage any such proposals. The reason is that it will hamper industry growth.

Chairman Pakistan Software Houses Association also commented that the Govt. intended to require IT fields into the decrease regime that has failed within the case of NGOs (non-governmental organizations).

Bangladesh Taking as instance he said that that the IT sector has not only been granted tax exemption, no doubt, however, there was an addition as well and which 10 percent cash rebates /rewards in Bangladesh. On contrary, the replacement of exemption through the process of decreasing the scheme would only result in harassment to the IT sector through the hands of the Commissioners of Inland Revenue.

One of the most important he claimed that if the IT sector is no going to be facilitated regarding the taxation matters, then the people will move to other countries such as Bangladesh.

He also put a very deep questioned that how would-be freelancers and little IT service providers will stay in the field on a longer term basis; they will become unable to rent tax consultants for maintaining documents under the proposed decrease scheme.

Burqan Saeed said that the documentation of the IT sector is quite clear along with the very fact that everyone has to first register with the Exchange Commission of Pakistan (SECP). After that with the Federal Board of Revenue (FBR) as well, and everyone with the provincial nuisance tax authorities. In addition to that, people must have to register with the social security/EOBI/ disability program. After registration, they have to operate under the provincial laws and stamp tax and pay local taxes. Now those registered persons are bound to propose IT-enabled services and the tax thereon.

Although, the FBR’s approach regarding Tax Treatment has oriental for the sake of expansion in the IT sectors; its police are also aimed at increasing the revenue through all means. According to the lasts news regarding the withdrawal of tax Exemption on replacing with a decrease Scheme and the export of IT services. However, the decrease in the subject for fulfilling many conditions such as full filing the tax holder’s statements and the tax returns. All these things will put negative impacts on the IT exports growth trend

Thus there remains no justification for asking the industry to file nuisance tax returns. Other than that the nuisance tax on services may be an outside FBR’s domain and a provincial subject.

Tags : IT Taxation
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