Exporters, academia, and policymakers have suggested measures for digitizing governance, regulation, and the economy for Pakistan IT industry stakeholders. The recommendations include a national data exchange layer establishment and adopting the Pakistan Digital Stack.
They advocated the need to rationalize taxation on digital services and infrastructure with a view to attracting investment and hence creating a more stable and sustainable environment for Pakistan. Recommendations therein include rationalizing all digital infrastructure taxes to competitive levels and capping sector tax rates for ten years.
Among the recommendations is a 5% General Sales Tax (GST) for digital transactions as against the 18% available for cash transactions. With the reduced taxation, operational costs will decline, the economy will become formal, transparency will increase, and tax revenues increase.
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The recommendation to reduce the corporate tax from 29% in Pakistan to below 20% for both digital and non-digital companies is another major aspect that came out. This lower tax regime would foster business development and innovation and render Pakistan more competitive regionally, thus boosting job creation and foreign direct investment (FDI).
These recommendations were incorporated in a white paper published by P@SHA entitled “The Roadmap for Digitally Inclusive and Economically Vibrant Pakistan.” The paper calls for a predictable policy framework for encouraging private investments in digital public infrastructure (DPI) and rules that foster innovation and competition.
Another one is expanding internet access and device ownership, specifically for women, by providing low-cost or installment-based smartphones and cooperating with local and international partners through public-private partnerships (PPP).
By easing certain foreign exchange controls for various international companies that conduct business in Pakistan, new multinational tech companies would be encouraged to set up offices in the country, hire local qualified professionals, and make a contribution to economic growth.
Society with payroll taxes reduced down for IT companies close to 6-8% from the current 24-25% will increase competitiveness of the industry and avail to enable reinvestment in talent and infrastructure.
Legal reform, i.e., establishing specialized commercial courts, combined with the establishment of Alternative Dispute Resolution (ADR) tribunals, could quicken the pace of resolving disputes. This would be supplemented with a capital gains tax exemption of 20 years for technology startups to attract venture capital investment. Given that, Pakistan has a 15 percent current capital gains tax, the reduced or exemption of this tax will increase the attractiveness of the country to foreign investors with regard to international standards in the likes of global hubs such as Singapore.