To ensure that business can be conducted in the IT/ITes sector, the IT industry has recommended an automated tax regime.
A report that has been prepared by the Pakistan Software Houses Association ([email protected]) on the tax analysis of the IT sector in Pakistan has been sent to the federal government with recommendations for action. A recommendation made in the report of [email protected] was the establishment of an automated tax regime and the creation of a national one-shop operator for taxing the IT sector.
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The recommendations have been recommended that the federal government nominate exclusive tax commissioners to be in charge of IT and ITes sectors in the future.
According to the report, [email protected] suggests that the FBR would nominate a commissioner representing the sector of IT and ITeS. A commissioner of this kind would typically be responsible for resolving issues faced by IT companies and supporting them with any FBR-related matters.
As a first step, these exclusive tax commissioners should be nominated for three important cities in Pakistan: Islamabad, Karachi, and Lahore. Another recommendation is that a separate wing would be created at FBR specifically for the IT companies to facilitate their operation.
The recommendations have included the suggestion that the federal government should be able to grant IT and ITeS companies the right to maintain 50 percent of foreign currency with hassle-free and efficient in and outflows. It is estimated that 90% of the IT industry consists of SMEs, and the most significant challenge these companies face is managing their business efficiently and at an affordable cost. Establishing Special Technology Zones is essential to accelerate the process of establishing them.
There has been a request from the federal government to establish a high-level committee tasked with resolving any tax disputes between IT companies and the government. There is increasing anxiety and uncertainty in the ecosystem in response to the sudden regulatory changes, particularly regarding the taxation regime.
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It is essential to avoid unwarranted notices by government bodies and authorities to reduce the cost of business and compliance activities and restore trust within the business community. Similarly, unlisted companies are discouraged from registering by these actions by the tax authorities, which negatively impacts the growth of the IT industry as a whole.
Moreover, [email protected] has requested that the federal government address the issue of double taxation of IT at both the federal and provincial levels; in every instance, GST should be retracted on electricity. Based on the report’s findings, it is recommended to encourage tax harmonization across provinces and federal units. It would be ideal if taxes would be reduced to 5 percent on domestic services with an adjustment for inflation. According to the report, the government ought to introduce a system of refunding the sales tax on electricity, gas, and services used as inputs for assembling output goods intended for export.