Consistency needed in export facilitation | Political economics

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PPakistani industrialists once had an obsession with the physical. The focus was on traditional industries. Nowadays, however, innovation is central to the rapid development of any country. The rise of artificial intelligence, machine learning and IOTs has been described as the fourth industrial revolution. The governments of Pakistan have also recognized its importance and have developed policies to facilitate the IT sector.

The Punjab IT Policy, crafted in 2018, had a huge impact on the industry. The policy aimed to create an enabling environment for access to IT services and their adoption. He proposed tax cuts to facilitate entrepreneurs, freelancers and startups. In particular, he advocated tax breaks for computer exports. A policy of 100% tax and exchange exemptions was announced this year for IT companies and freelancers. This raised hopes in the IT sector. However, a 0.25% levy has since been imposed by banks on all incoming funds through the 2022 Finance Bill. to take the exemption for granted. The action may hinder the growth of the IT industry and the earning potential of freelancers.

According to the Punjab IT policy document, Pakistan earned $560 million from IT and IT-based exports in the financial year 2015-16. He said “this figure could reach $2.4 billion and total IT revenue, including exports and domestic revenue, nearly $3.1 billion for the year.” There was a detailed plan to empower young people through tax breaks for the self-employed and create an entrepreneurial ecosystem to encourage them by listing plans to “engage with the State Bank of Pakistan to simplify the registration process self-employed income as export income and not remittances.”

Pakistan’s software export demand has recently increased in developed countries. The sector has created jobs for young people and can continue to do so. The focus should be on exploiting long-term growth potential. Pakistan has 600,000 IT professionals and exports are expected to cross the $2 billion mark

A change in policy from tax exemption to tax deduction may cause panic and restrict foreign investment. It may also discourage freelancers from bringing their income into the country, thus hindering the growth of the IT sector. The tax may discourage young people who have just started their career as self-employed.

Today, Pakistani youth are learning a variety of skills and seeking to make a place for themselves in the global gig economy. In a country where there are not many jobs available for young people, self-employment can bring stability and stimulate the economy.

It has been claimed that the tax will amount to 25-30% of the profits of many IT companies. This will make companies hesitant to bring their profits to Pakistan.

In recent years, the IT sector has performed well. It has huge potential in the service sector. It is high time we recognized the potential of our IT industry. Pakistan’s software export demand has been growing among developed countries. The sector has created jobs for young people. He continues to do so. The focus should be on exploiting long-term growth potential. Pakistan has 600,000 IT professionals and exports are expected to cross the $2 billion mark.

Currently, there are more than 30 incubators and 500 startups in the country. Freelancers and IT companies can only help attract foreign investment if they have the right tax incentives and policies. Policies like the Punjab IT Policy can boost this sector and help the country grow.

Growth is impossible without the government providing the necessary facilities and tax cuts. The shift to full tax exemption can jeopardize the IT sector.


The author is an MPhil Fellow at ITU


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