The Federal Board of Revenue (FBR) has sent notices to hundreds of information and communication technology (ICT) companies working in Pakistan, asking them to prove themselves as an ICT companies.
The FBR has stopped issuing exemption certificates to 70 to 80 major companies as well, sources in the ICT sector told The Truth International (TTI).
The growing ICT sector is facing a continuous harassment at FBR level while the Ministry of Finance has still not implemented the ICT package, which was approved by the former Prime Minister Shahid Khaqan Abbasi cabinet, they say.
The PTI government has withdrawn the tax exemption regime that was to last until 2025 for ICT sector and started a tax credit scheme, which is proving counterproductive.
Managing Director S&P, Mujeeb Zahoor said that it is astonishing that Ministry of ICT and Commerce is recording the export
numbers of these companies but FBR is not recognizing them as ICT companies. The government has announced a package but it has yet to be implemented. The delay is inexplicable.
Zahoor said that lack of talented and skilled workforce is one of the bigger challenges ICT sector is facing in Pakistan today. In Pakistan, ICT companies have to train their workforce and then hire them for a particular project, which is a drawback.
Mujeeb Zahoor said, “The government talks much about ICT sector but it needs to be recognized as a key strategic sector like in other countries of the world. It is need of the hour to make the ICT sector a strategic priority. For the promotion of ICT sector, commercial counselors need to be trained”.
P@sha chair Barkan Saeed said that government should Improve things at FBR related to ICT industry and create dedicated commissioners in all RTOs who deal with ICT matters and understand the ICT industry. It should increase the budget for
ICT industry participating in conferences globally and reform and revamp PSEB as it has almost become a dead organization.
Pakistan Business Counsel chair Ehsan Malik says the ICT sector is struggling hard to secure financing from banks, who seek collateral. State Bank of Pakistan should start a scheme to provide collateral-free loans to the ICT sector to help with cash flow issues.
P@sha says that many export-oriented companies which also have offices in other countries will refrain from sending any additional export remittance to Pakistan and will only send payroll expenses here due to fear of tax credit removal during the FBR audit process.
This sudden change in the policy based on the demands of the International Monetary Fund (IMF) is going to have adverse effects on the growth and rising exports of the ICT sector.
Such inconsistencies in the policies send out a discouraging message to enterprises and investors looking to enter into Pakistan. This decision has shown investors that any policy benefit to any sector can be reversed at anytime without consulting the relevant sector.
ICT & ITeS (IT enabled Services) is currently the fastest growing sector of Pakistan with more than 40 percent growth as compared to last year. The sector has been able to do that without any substantial incentives offered by the government such as cashback on exports, subsidized electricity tariffs, loans on lower interest rates, etc., which have been offered to other sectors over the past several decades.
While other regional countries offer incentives to their ICT sectors. Bangladesh offers 10 percent cash reward on the ICT/ITeS exports despite the tax exemption. China and India have Special Economic Zones where numerous incentives and including tax relief are already available for the ICT and ITeS sector for the past many years.
The Government of Pakistan, instead of incentivizing the rising sector, has taken back the only relief it had available.
According to the estimates, the average yield of a worker in traditional industries is around USD 600 per annum whereas the average yield of a knowledge-worker in the ICT/ITES industry is more than USD 20,000 per annum.
Systems Limited (SYS) becomes the first Pakistani information technology company to cross PKR 100 billion market capitalization. The company has announced that its current share price stands at PKR 740.93, which translates to PKR 102 billion in market capitalization. The reports from the second quarter demonstrate a strong balance sheet and financial strength of the company.
Pakistan has set a target of doubling its ICT exports during the current year. ICT Sector exports increased to a record USD 2.1 billion during the fiscal year 2020-2021 despite the Covid-19 pandemic. The share of ICT exports in the overall exports related to the services sector is around 36 percent.
Ehsan Malik hopes that ICT exports could jump to USD 4 billion in a year if the package for the ICT and telecom sector announced by the government is indeed implemented. The provincial general sales tax (GST) regime has to stop taxing call centres and business process outsourcing units for services rendered to overseas clients, he said.
MOIT has set the target of USD 3 billion in export remittance inflows from Pakistani ICT and ICT-enabled services freelancers in next three years and asked to prioritise all possible measures to ensure sustainable growth of gig economy in Pakistan.
The government announced to establish a PKR 10 billion fund for providing cash rewards to ICT companies based on their export performance. The government is also set to offer a five percent rebate on these exports. Freelancers would be allowed to open a special dollar account to receive payments for their individual ICT exports.
ICT Industry says that it is high time for the government to realize that the ICT sector is going to be the only sector that can resolve the issue of balance of trade, create employment for the huge population, and transform Pakistan into a knowledge economy.
With its immense growth potential, the ICT sector has the potential to help end Pakistan’s economic woes and rid the country of further IMF programs. However, if conducive policies are not introduced and incentives are not offered, growth of exports will slow down and large sums will be parked abroad.
