Business

Tax Free Software Industry

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Pakistan’s IT industry has a come a long way. Today it stands as the country’s fastest-growing export sector. From less than $20 million in annual exports in 2000, Pakistan’s annual IT exports have crossed the $2 billion threshold with an annual growth rate between 30 and 40 percent. IT industry enjoyed a tax exemption for over a decade. However, the tax holiday expired after June 2016. Pakistan’s IT industry adds approximately over $2 billion to $3.5 billion to the gross domestic product (GDP) every year. Innovations in the IT industry have enabled other industries such as agriculture, textiles and automobiles to grow exponentially. The IT industry was hurt, especially entrepreneurs who have started small companies, if the tax exemption is removed. But the tax exemption was removed, companies took their businesses elsewhere and Pakistan had lost significant amounts of revenues. Pakistan is the second most attractive market for IT businesses given the incentives offered by the government. However, there is so much more that needs to be done. Sadly, the government continues to treat IT as a sector. Times have changed. Pakistan cannot survive without innovations in information technology. Nearly 40% of Pakistan’s companies that provided IT services have moved their business to the United Arab Emirates, largely due to the additional tax on revenues levied by the government. The decision of imposing tax on IT services to generate additional revenues is actually proving to be fatal as several small companies have moved their offices to Dubai, a tax haven and only 1.5 hours away from Pakistan. So now it is Dubai that is seeing an increase in employment and business, not Pakistan. Pakistan may be fast when it comes to building roads and bridges to bring the China Pakistan Economic Corridor to life. But aside from buildings, roads and machines, the country will require intelligent human resource to keep it running. With investments that are nearly nil, the IT sector doesn’t stand a chance of becoming an actual industry until we begin investing earnestly in the nimblest minds within our own borders.

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