Finance amendment bill proposes tax rate hike for IT sector

Rates for withholding tax, sales tax likely to be increased

ISLAMABAD: The proposed finance bill, due to be presented in the parliament, includes rate hikes for sales tax and withholding tax (WHT) imposed on the IT and telecommunication sector, Profit learnt on Tuesday.

According to the details, the government is looking to raise the WHT from 10 per cent to 15pc, while restoring the rate of 17pc sales tax on the import of computer and IT equipment in the upcoming mini budget. 

The move is disappointing news for the sector and the Ministry of Information Technology and Telecommunication (MoITT) as it will hinder efforts to achieve $5 billion ICT exports by 2023. 

The hike will have a two-fold effect. On one hand, it will increase the input cost for IT sector players like freelancers and tech startups for whom computers, laptops, and other related accessories are essential to function while on the other hand, the cost of services will increase for mobile services consumers, the majority of whom are not generating taxable income thus, advance tax will never be recovered by them.  

It is interesting to note that the government had earlier proposed to gradually decrease the WHT to 8pc by 2023 under its Digital Pakistan programme. However, it now seems that it has prioritised short-term revenue goals over the vision. This step may backfire for the government’s revenue ambitions if it restricts the sector from achieving the envisaged revenue targets. 

Earlier this week, the World Bank in its “Telecommunications Advisory Assistance, 5G Readiness Plan for Pakistan” stated that to speed up the deployment phase of 5G in Pakistan, the government needs to maintain a consistent policy stand and reduce the taxation on the sector. 


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Ahtasam Ahmad
Ahtasam Ahmad
The author works as a Sector Analyst at Profit and can be reached at [email protected]


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