Pakistan has decided to formally join the Information Technology Agreement (ITA) by signing the second phase of the agreement (ITA-II), the decision in this regard is likely to be made by the Federal Cabinet.
An official source said that by joining the ITA-II, the government expects an upsurge in investment in the IT and telecom sector, as well as help mushroom the growth of e-commerce that would usher in a new era of job opportunities for the youth before the next general elections. Former Prime Minister Nawaz Sharif has formed a secretaries’ committee that consists of federal secretaries of IT, commerce, industries and revenue division to examine Pakistan’s accession to ITA-II.
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 duties exemptions and Rs 6 billion in tax concessions. Ministry of IT supported the move while Commerce and Industries secretaries also supported joining ITA-II.
However, this figure was contested as the committee was informed that the initial loss might be of a few billion rupees but the tax benefit in the shape of growth of GDP would help in generating more than double the loss.
Nearly 70 per cent 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 attracting foreign direct investment.
Pakistan is amongst the top five countries which have the highest import taxes on IT products. To accommodate a large number of youth, the government must incentivise the IT sector, and it could help the country leap forward to enter the era of ICT, they stressed. The committee would be giving its recommendations within the next few weeks and the prime minister would be making 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. Since Pakistan has not signed ITA, much of the local IT sector provides free-lance services, a major reason for Pakistan being a leading freelancing country, the export earnings are not registered with the central bank. On the other hand, India was quick to join ITA and her software exports increased from $ 565 million in 1999 to $ 82 billion in 2014-15.
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 represent about 97 per cent 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 that is 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 majority of the tariffs will be eliminated within three years.