Recently, Pakistan Software Houses Association for IT and ITeS (P@SHA) has published a comprehensive report discussing the impacts generated because of the elimination of income tax exemptions, as being considered by the government. The report notes that if these exclusions are removed before 2025, which is the original time limit that was offered by the government, it will not result to be beneficial to the revenue collection, instead, it will be disastrous for the increase and proliferation of the IT businesses in Pakistan.
According to statistics, the IT sector in Pakistan has about 300,000 IT experts, provides 25,000 graduates a year, and has an export record of $1.2 billion a year. This accounts for 25 to 30 percent of the service division exports. Over the past five years, the IT industry’s participation in total exports has increased by 100 percent. The report further mentions that with the dismissal of the exemptions, the revenue is much less expected to grow, while the expense of conducting business will probably go up as the smoothness of managing business goes down.
The ease of conducting business will go down because of the following reasons:
- Gap between policy purpose and implementation
- Stance and the scarcity of industry knowledge in tax officers
- Increase in discretional powers of the tax officers
- Increase in market risks’ exhibition
- Unjustified warnings resulting in difficulty and non-ending lawsuits.
Furthermore, other probable outcomes of such a transit may intimidate new businesses to report and enroll. “Out of potentially 10,000 IT companies, only 2,500 are registered”, the report implicated. Besides, this notion might further direct the present businesses to be more burdened and ultimately take their headquarters abroad promoted by their pragmatic nature of business.
The report of the association also reflected that if the already implemented tax exemptions remain till 2025, it will not only maintain the predicted increase in the IT businesses, but it will be more possible to further strengthen due to more favorable conditions and a surge of opportunities for export after the pandemic. The exemptions left intact will further present ideal growth with Software Technology Zones (STZ), the report concluded.
Source: Pro Pakistani