IT exporters cheer tax immunity, hope to fetch $50bn in 5-6 years

KARACHI: Experts and IT industry have lauded the government’s new package giving 100 percent tax exemption to both freelancers and IT companies, terming it beneficial for raising IT exports to $50 billion in five-six years.

“Sadly for decades, Pakistan has only focused on the physical world,” said Veqar ul Islam, director and chief executive, Jaffer Business Systems, which is an Information Technology Company in Pakistan. “The government used to give policy for the physical world (traditional industries) but there was nothing for the digital world (IT sector) beyond fashion statements.”

However, he agreed that for the last few years, Pakistan has been taking the “digital world seriously and its time we move ahead of only brick and mortar mindset”.

He also praised the recent package the government has announced for the IT sector.

Prime Minister Imran Khan recently announced 100 percent tax exemption for both IT companies and freelancers. Meanwhile, they have also been given 100 percent foreign exchange exemption, which means they can collect foreign currency that has come as export remittances. Meanwhile, IT startups have also been 100 percent exempt from capital gains tax.

“This is a good package for the IT industry,” said ICT Consultant Parvez Iftikhar. “The young people are doing a great job and this would help them improve and entice others as well.”

He said Pakistanis, especially the youth were now profusely making softwares, apps, games and animations for the foreign market. “Many of the animations for Disney have been made by Pakistanis,” he added.

Khurram Schehzad, CEO, Alpha Beta Core, said the package would help the IT sector increase its export potential too. “Pakistan’s IT sector has an export potential of $50 billion. If the government continues to facilitate the sector, it could reach its true potential within a decade,” he said.

The PM has said that India’s IT exports have reached $40 billion annually and Pakistan’s IT exports were yet to reach $4 billion despite a 70 percent increase.

Veqar ul Islam concurred that Pakistan’s IT sector has huge potential and praised the government for setting an ambitious goal of increasing IT exports to $50 billion in the next five to six years. However, he said that $20-25 billion exports could be achieved in the next five to six years.

“The IT industry should be the next textile industry for Pakistan. In fact, the IT industry will overtake the textile industry in future (in terms of exports).” However, he said that the biggest challenge the sector faced was the ‘brick and mortar’ mindset in Pakistan.

People still preferred paper here, when the world was going towards digitising. This, he believed was due to tax evasion not for record-keeping.

Meanwhile, Pervaz Iftikhar said the IT sector package was commendable, but it needed to be complemented with a package for the telecom sector, which provides broadband services. “Internet and broadband are the wheels for the IT sector,” he said, urging the government to also incentivise the communication sector.

A source from the telecom sector, on condition of anonymity, said that broadband subscribers were not even 50 percent of the population. The industry has a tax of 34.5 percent and was treated as a luxury industry, which it was not.

“Telecom services improve productivity”, and it these were inexpensive, it would improve productivity in the IT sector and IT enabled services as well, the source said.

Khurram Schehzad said startups should also be given tax exemptions as they needed a lot of liquidity and taxes hindered that, which also affected performance. “They (startups) would direct their energy and resources towards finding new markets and their positioning,” he said.

He further said that taxation should be simplified as much as possible to facilitate industries to direct their energies in their core operations rather than getting stuck in diversions.