P@SHA urges govt to bring remote workforce for foreign firms into tax net

ISLAMABAD: Pakistan’s Information Technology (IT) sector has asked the government to bring the remote workforce working for companies abroad into the tax net because it disincentivises those working for Pakistani companies and paying heavy tax on their earned salary income.

Extending warning to the government for shifting their companies abroad, they asked for consistency in policies for the next 10 years in order to lure investment and fetch export earnings beyond the $4 billion mark, which they expected to be achieved by the end of the ongoing fiscal year.

Addressing a news conference, Sajjad Mustafa Syed, Chairman Pakistan Software Houses Association (P@SHA), and Salman Dar, Central Executive Committee Member, said that there were requirements to ensure consistency in policies. They lured $600 million investment recently in Pakistan and they were anxiously waiting for sustainability and consistency in policies for the next 10 years.

The P@SHA high-ups were of the view that Pakistan currently has one of the highest tax rates and negligible surety over consistency of policies. They presented comparisons among different states and stated that the corporate income tax was 29 percent in Pakistan, where it was as low as 9 percent in the UAE, and 25 percent in Vietnam that has annual IT exports of $141 billion, whereas other taxes and input costs too were high in Pakistan.

He added that the IT industry has demonstrated resilience amid economic turbulence, contributing $3.2 billion exports in 2023-24, and is projected to close the current fiscal touching $4 billion mark. The IT exports could be increased to $15 billion, he said and added that they were not asking for any subsidies but vying for policy consistencies.

P@SHA has asked the government to formally define remote workers in the Income Tax Ordinance (2001), as this lacuna was causing the IT companies additional 30 percent income tax on employees earning over Rs2.5 million annually, whereas those working for international clients do not have to pay high tax rates.

“If the tax regime was changed in the upcoming budget -- there were only two choices either the clients leave Pakistani companies as cost of business will increase or we shift to any conducive market like the UAE, Vietnam or Philippines, etc,” Syed said.