P@SHA asks Govt to remove Export Receipts tax in Upcoming Budget

Pakistan Software Houses Association (P@SHA) has asked the government to eliminate the 0.25 percent tax on IT companies’ export earnings in order to increase foreign exchange inflows into Pakistan.

IT companies urged the government to support the sector, which could bring foreign exchange to the country, in the proposed budget for fiscal year 2023-24.

In 2021, the government imposed a tax on export remittances, which had a negative impact on IT companies’ export earnings as well as the country’s much-needed foreign exchange inflows.

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In the previous fiscal year, the country lost more than $500 million in potential export income. During the first ten months of the current fiscal year, exports fell by 3% to $2.13 billion.

P@SHA has asked the government to reduce IT sector costs and taxes for local procurement, including a withholding tax exemption for local IT services. The association also proposed that the government implement a 5% cash reward on IT exports, primarily to encourage them to meet the $5 billion export target by 2025 by working aggressively on IT projects.

P@SHA also reiterated its demand for 100% forex retention permission in bank accounts and 100% repatriation via corporate debit cards and the Internet banking.

The association of software houses also sought government assistance in expanding the footprints of the IT industry on a long-term basis through industry development and human resource generation.

The government should prioritise reviving the Export Refinance Facility for the IT sector at a 50% discount, including the establishment of IT clusters in major cities, enabling STZA benefits for the entire IT industry, and introducing the STZA lite concept.

According to the proposals, the next budget should include a Rs. 10 billion allocation for skill development initiatives aimed at 50,000 young professionals and students, as well as scholarship programmes for 10,000 undergraduate students. Investment in human capital will benefit the IT industry’s efficiency and create skilled jobs for young people.

The government should set aside funds for IT-specific export development, including funds for branding and marketing Pakistan and its IT industry.