Pakistan to debate controversial 5 percent ‘digital revenues’ tax

Pakistan to debate controversial 5 percent ‘digital revenues’ tax
The proposed fiver percent tax on "digital revenues" is unlikely to significantly impact international firms. (Shutterstock)
Updated 05 May 2018

Pakistan to debate controversial 5 percent ‘digital revenues’ tax

Pakistan to debate controversial 5 percent ‘digital revenues’ tax
  • Proposal floated by tax body has been condemned by the government and opposition
  • Tax forecast to have little impact even if it's approved by parliament

KARACHI: Pakistan’s senate will on Monday discuss a controversial proposal by the country’s tax body to impose a 5 percent levy on the “digital revenues” of foreign firms such as Facebook, Google and Twitter that are active in the country.
The Federal Board of Revenue on Friday proposed including the new tax in the country’s federal budget for 2018-19. The tax, which was reportedly proposed by the FBR without consultation from the companies it is targeting or Pakistan’s ministry of commerce, was condemned by both the government and the opposition.
But the move will still be debated in the upper body of Pakistan’s parliament on Monday, Senator Aurangzeb Khan, member of the senate’s committee on finance, revenue, economic affairs and narcotics, told Arab News.
“We asked the FBR to give us the surety that the tax burden would not be shifted on to the public but their reply was not satisfactory,” he said.
“However, if they give us a guarantee that the burden would not be passed on to the general public then we will give approval.”
“We will consider the interest of Pakistan.”
Discussions will also be held in parliament’s national assembly; if approved, the measure could come into law. Even if approved, the measure is likely to have minimal impact on the likes of Facebook and Google, given their limited physical presence in the country, according to experts.
“In (the) current situation they cannot impose tax on these companies because they do not have any physical presence,” said Badar Khushnood, co-founder of digital media and marketing agency Bramerz.com, and a former employee of Facebook, Twitter and Google in the country.
The Ministry of IT did not do anything to invite these countries to set up office in Pakistan, Khushnood said, adding only companies that have a physical presence could be brought under such taxation measures.
Pakistan’s IT is still in a nascent stage that can not afford any such tax measures, according to Pervaiz Iftikhar, an IT expert and consultant.
“This is not the first time that our government is taking measures (like this). Such measures have failed in the past,” Iftikhar told Arab News, saying “such measures will (prompt) the companies to quit which will have a negative impact on the country’s growing IT sector.”
But some analysts favor the move of imposing taxes on global tech
giants operating in the country.
“These companies are generating revenues from Pakistan that are much more than some of our own companies. If these companies are taxed it would ultimately benefit Pakistan,” said Aamir Atta, founder of propakistani.com, a web-based news site.
A potential way to generate tax revenue from the likes of Google and Facebook would be to target local firms used by such companies to host their sites, according to Amjad ullah Khan, CEO of local IT firm Amjad Ahsan Infotech.
“Many Pakistani companies are hosting their websites and generating revenues in million of rupees; they should be brought under the tax net,” Khan said.