KARACHI: Experts and the IT industry have hailed the government’s new package granting 100% tax exemption to freelancers and IT companies, calling it beneficial in boosting IT exports to $50 billion in five to six years.
“Unfortunately, for decades Pakistan has focused only on the physical world,” said Veqar ul Islam, director and managing director of Jaffer Business Systems, 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 in recent years Pakistan has taken the “digital world seriously and it is time we moved ahead of brick and mortar mindset only”.
He also welcomed the recent package that the government announced for the IT sector.
Prime Minister Imran Khan recently announced a 100% tax exemption for IT companies and freelancers. In the meantime, they have also enjoyed 100% foreign exchange exemption, which means they can collect foreign currency as export remittances. Meanwhile, IT startups have also been exempted from 100% capital gains tax.
“It’s a good package for the IT industry,” said ICT consultant Parvez Iftikhar. “The youngsters are doing a great job and it would help them improve and attract others as well.”
He said that Pakistanis, especially young people, now profusely produce software, apps, games and animations for the overseas market. “A lot of animation for Disney has been done by Pakistanis,” he added.
Khurram Schehzad, CEO of Alpha Beta Core, said the package will also help the IT sector increase its export potential. “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 Prime Minister said that India’s IT exports had reached $40 billion a year and Pakistan’s IT exports had yet to reach $4 billion despite an increase of 70%.
Veqar ul Islam agreed that Pakistan’s IT sector has huge potential and praised the government for setting an ambitious target to increase IT exports to $50 billion over the next five to six years. However, he said exports of $20 billion to $25 billion could be achieved over the next five to six years.
“The IT industry is expected to be Pakistan’s next textile industry. In fact, the computer industry will overtake the textile industry in the future (in terms of exports). However, he said the biggest challenge facing the sector was the “bricks and mortar” mindset in Pakistan.
People still preferred paper here as the world moved towards digitalization. According to him, this was due to tax evasion and not record keeping.
Meanwhile, Pervaz Iftikhar said the package for the IT sector was commendable but needed to be complemented by a package for the telecommunications sector, which provides broadband services. “Internet and broadband are the cogs of the IT sector,” he said, urging the government to encourage the communications sector as well.
A telecommunications industry source, speaking on condition of anonymity, said broadband subscribers did not even make up 50% of the population. The industry has a 34.5% tax and was treated like a luxury industry, which it was not.
“Telecom services improve productivity,” and if they were inexpensive, it would also improve productivity in the IT sector and IT services, the source said.
Khurram Schehzad said that startups should also get tax exemptions because they need a lot of cash and taxes hinder that, which also affects performance. “They (startups) would direct their energy and resources towards finding new markets and positioning themselves,” he said.
He further said that taxation should be simplified as much as possible to help industries focus their energies on their core business rather than getting stuck in diversions.