Ishaq Dar refuses to give tax exemption on IT exports
The finance minister Ishaq Dar has rejected the IT industry’s demand for a modest tax exemption on services to support the industry’s declining exports, but agreed to provide maximum facilities to the IT sector including exemption from audit by the tax authorities.
Finance Minister Ishaq Dar while presiding over a meeting related to the IT sector said that the effective tax rate on this sector is about 0.25% which is nominal and very minor.
“Instead of asking for exemption, one should get used to paying tax on income, Rs2.5 on exports of Rs1000 is equivalent to no tax,” he said.
However, he assured that tax notices will not be sent by Federal Board of Revenue (FBR) for providing services to IT professionals and their tax returns will not be audited to reduce revenue cost.
The finance minister also directed the FBR to set up a unit where the officers will provide one-window facilities and play a role in mitigating difficulties in this regard by promptly looking into IT sector refund and tax credit cases.
Finance Minister Ishaq Dar is the Chairman of the Task Force established by the Prime Minister for Information Technology and Telecom Sector. In the task force meeting, IT Minister Syed Aminul Haq, Special Assistant to Prime Minister on Youth Affairs Shaza Fatima Khawaja, Special Assistant on Finance Tariq Bajwa, State Bank Governor Jameel Ahmed, Finance Secretary Hamid Yaqoob Sheikh, IT Secretary Mohsin Mushtaq, FBR and chairpersons of Pakistan Telecommunication Authority (PTA) also participated.
Sources said that the IT Ministry took up issues related to several challenges affecting the software export sector with the task force.
It was clarified that after the end of the tax holiday given to the IT sector, during the premiership of Shahid Khaqan Abbasi, the PML-N government had imposed a final tax of 0.25%. It could not be implemented due to traditional challenges with the tax authorities and top-ranking companies like S&P Global started receiving notices.
In addition, the government reduced the advance income tax for this sector from 12 percent to 10 percent in the budget for 2021-22 and assured that it will be reduced to 8 percent in the next financial year.
The IT sector and the ministry have expressed concerns that the sector has been paralyzed due to which exports have declined by million dollars during the first few months of the current financial year compared to the year-ago period.