The government is likely to extend the 15-year tax holiday granted to the IT and IT enabled services sector by the General Pervez Musharraf regime in 2001 by another two years till its tenure ends in 2018.
An official source said the tax exemption was proposed to be extended for another five years, but the ministry of IT and Telecom decided to extend it for next two years until the expiry of incumbent government’s term.
The source said the 15-year tax exemption would end on June 30, 2016. However, he said the tax holiday was more of a misnomer, as during this period the sector paid all the duties and taxes applicable on hardware supplies but got relief from corporate taxes.
It is important to mention that the highly profitable IT sector largely remains undocumented in the country. The matters are worse to such an extent that officially Pakistan has IT exports of close to $ 600 million per annum while unofficially the exports are said to be over $ 2 billion.
The government was asked to maintain tax exemption for the sector as it had small financial impact. If the government ends tax holiday, the majority of the IT companies will abstain from registering with the Pakistan Software Export Board, the official agency to promote software exports.
Some of the companies have been deregistered from the Board as their data was shared with the provincial revenue authorities which sent them tax notices. Under this kind of scenario, most of the companies will vanish in thin air, the source said.
General Musharraf provided incentives to the IT sector in 2001 to catch up with the rising Indian IT exports that totaled $ 1 billion then. Indian managed this feast by signing WTO’s IT agreement in 1999, while Pakistan still remains undecided whether or not to join an international agreement.
