Pakistan’s IT minister objects to tax changes he thinks may harm local IT industry

Crackdown on offshore payments to freelancers hits a nerve

Pakistan’s minister for IT and Telecom, Syed Aminul Haque, has protested the government’s new tax treatment for IT companies.

Haque expressed his concern in a Tweet timed to coincide with a meeting of the Prime Minister’s Taskforce on IT & Telecom.

Today, I’ve expressed deep concern over the FBR’s tax notices to the IT sector, as it’s confusing investors whose exports pave the way of stabilisation & remittances.

However, I thank the IT Task Force for pushing forward the #DigitalPakistan vision & am proud of the milestones. pic.twitter.com/cqj2Bl9xK2

— Syed Aminul Haque (@SyedAminulHaque) March 31, 2021

Proposed changes to Pakistan’s tax laws include imposition of sales tax on revenue earned offshore but performed locally.

Such a change would impact the prospects of the army of freelancers Pakistan hopes will help it to quadruple IT import revenue.

Pakistan’s Federal Board of Revenue has already shown it aims to make sure those workers pay tax, after calling out cross-border payments company Payoneer for allowing users to collect cash without paying tax.

Payoneer is suggested as the preferred payments option by some Pakistani gig-finding platforms. The company pushed back against the Revenue Board, arguing that it just operates a platform and customers have responsibility for their own tax affairs.

Pakistan’s government, which is not flush with funds in its best years, has floated the changes to raise more revenue. The nation’s tech services industry is also tiny: even if it reaches Haque’s goal of $5bn in annual remittances for services, it will still trail alternative offshore destinations like the Philippines and be more than $100bn behind India’s annual haul.

Haque’s objections seem not to have had an impact, as prime minister Imran Khan has approved the changes to tax laws although they are yet pass a parliamentary vote. ®