By AMER SIAL
After abstaining from the plurilateral Information Technology Agreement (ITA) for last two decades, the government is actively considering joining the expansion of the agreement known as the ITA-II.
An official source said that the Prime Minister has formed a committee that consists of federal secretaries of IT, commerce, industries, and the revenue division to examine Pakistan’s potential agreement to the ITA-II.
The committee held a meeting in which the information technology, commerce, and industries secretaries supported joining the ITA-II, while the Federal Board of Revenue (FBR) opposed the move claiming that it would cause a revenue loss of Rs 3 billion on account of custom duty exemptions and Rs 6 billion in tax concessions.
However, this figure was contested by the experts present in the meeting, who claimed that the initial loss might be of a few billion rupees but the tax benefit in the form of GOD growth would help in generating more than double the loss. Nearly 70 percent of ICT products, including mobiles, computers, and other accessories were being smuggled into the country. Acceding to an international agreement would help end smuggling and help in attracting direct foreign investment.
Pakistan is amongst the top five countries with highest import taxes on IT products. To help the next generation compete, the government must incentivise the IT sector and help the country leap forward into an ICT era, they stressed. The committee will give its recommendations within the next few weeks and the prime minister will make the final decision, the source added.
Pakistan’s share of global IT sales is estimated to be $2.8 billion out of which $1.6 billion is attributed to IT services and software exports. As Pakistan has not signed the ITA, much of the local IT sector provides free-lance services, which is a major reason for Pakistan being a leading freelancing country. On the other hand, this means that the export earnings are not registered with the central bank. As a counter example, India was quick to join the ITA and her software exports increased from $ 565 million in 1999 to $ 82 billion in 2014-15.
Among Asian countries, the development of the IT sector of Vietnam is exemplary. Vietnam managed to be in the top 30 exporters of IT products in 2010 and the IT sector in Vietnam had highest annual growth among the top 30 IT exporters of the world. Between 1996 and 2010 the growth rate in their IT sector was 45 percent. IT exports from Vietnam amounted to $30 million in 1996 and reached to $5 billion in 2010-11.
ITA was concluded at the first WTO Ministerial Conference in Singapore in 1996. Initially, 29 countries signed the agreement and the number has now increased to 82 countries, which collectively represent about 97 percent of world trade in IT products.
ITA is basically a plurilateral tariff cutting framework and requires complete elimination of tariffs and duties on the IT products covered in the agreement. While entering into this agreement, the participants have to follow three basic principles that all the products mentioned in the agreement must be covered, all the listed products must be covered, and all the other duties and charges must be eliminated.
Pakistan has been deliberating on joining the ITA since 1997 while many other countries have moved on to an expanded IT agreement; the ITA-II. Some 54 WTO member countries agreed on the ITA expansion and confirmed the elimination of tariffs on 201 additional IT products. It was agreed that the reduction in tariffs will be started by 2016 and that the majority of the tariffs will be eliminated within three years.
These 54 countries have 90 percent share in the world trade of IT products. Some of the products included in the new settlement are new generation semi – conductors, GPS navigation systems, high-tech medical products such as the magnetic resonance imaging (MRI) machines, telecommunication satellites, and touch screens.
