ISLAMABAD: The Federal Board of Revenue (FBR) submitted a bill to the National Assembly (NA) secretariat, proposing a string of amendments to withdraw around 36 tax exemptions from July 1 onward in a bid to meet a prior action for the revival of the $6 billion International Monetary Fund (IMF) programme.
According to a local media report, the bill, which will be called the income tax (second amendment) bill 2021, will be introduced in the next session of the lower house, whenever convened.
The bill also seeks to streamline the tax regime for non-profit organisations, listing of firms in the stock market, exemptions for oil refineries, special economic zones (SEZs) being set up under the China-Pakistan Economic Corridor (CPEC) and Independent Power Producers (IPPs).
Certain penalties in the bill have also been revised for those who did not file their income tax returns.
Similarly, a new section introduced in the income tax ordinance proposes to allow 100pc tax credit on incomes of persons from exports of computer software or IT services or IT enabled services until June 2025 whereas there will be no turnover tax for the IT sector anymore.
Meanwhile, the information technology sector has deplored the FBR’s recent proposal regarding the withdrawal of income tax exemption on the export of IT services, and its replacement with a Tax Credit Scheme, wherein tax credit is subject to fulfilment of many conditions such as filing of tax withholding statements and sales tax returns.
P@SHA, the official representative of the IT industry said that the recent growth pattern, complemented by several supporting initiatives from the PM Office, has triggered a phenomenal interest from global investors towards Pakistan, adding that the existing tax incentives have been instrumental in the competitiveness of the IT industry viz-a-viz traditional competitors like India, Bangladesh, Philippines and Vietnam.
“However, the Federal Board of Revenue’s (FBR) approach towards tax treatment has been detrimental to the growth of the IT sector as its policies aim solely at raising revenue by all means,” the statement read. “By coming up with these conditions, FBR appears to have ignored the fact that export of IT services is exempt from sales tax, and hence there appears no justification to ask the industry to file sales tax returns.”
The association contended that sales tax on services was a provincial subject and was, therefore, outside the FBR’s domain.
“Such abrupt changes in tax policies will not only scare away new entrants/investors but will cause colossal damage to the growth trajectory of existing players,” the statement read.
P@SHA urged the prime minister to take action, invite industry stakeholders to discuss their concerns and discourage any such proposals that could hamper industry growth.
