Prime Minister studying incentive package for computer industry
ISLAMABAD (August 23 2007): Prime Minister Shaukat Aziz is examining an incentive package for computer industry to abolish duties/taxes on the import of call center equipment; withdraw GST on computers and levy 10 percent customs duty on the import of computer value of $600 or less.
Official sources told Business Recorder on Wednesday that the IT ministry has submitted the proposal to the prime minister for approval. The incentives included total waiver of sales tax on computer and reduction in duties and taxes to zero percent on the import of the call center equipment, including power supply. Such apparatus included IP phones, video conferencing equipment, and miscellaneous computer-related equipment, including switches and cables etc.
Moreover, 10 percent duty be imposed on the import of computer of the value of $600 or less to boost local assembly of computers by multinational companies. Officials said the viewpoint of the finance ministry would also be incorporated before taking any final decision on the proposed package.
Sources said a meeting on the incentives to the IT industry was held under the chairmanship of the prime minister on June 30, 2007. The prime minister issued directives to relevant ministries for promotion of the IT industry.
The prime minister had directed that the Pakistan should have an IT industry incentive regime which should be as good as any offered by comparable countries. Secondly, the IT ministry should develop a comparison of IT industry incentives offered by comparable countries. Thirdly, local assembly/manufacture of computers by MNCs like Lenovo should be comparatively incentivised pertaining to imports.
The IT ministry conducted an exercise to make a comparison of tax regimes applicable to regional countries with the local industry. Under the study, tax regimes for the IT industry in other countries are far more favourable than the tax incentives offered by Pakistan. The exemption from sales tax, corporate income tax, and import duty are available to the IT industry of Turkey; Vietnam; Thailand, and Malaysia.
Officials said the Pak IT industry has shown tremendous growth in the past four years with annual growth in exports averaging 50 percent. The companies listed on Nasdaq and the Karachi Stock Exchange (KSE) have acquired venture capital from overseas, and have gone through merger, and acquisitions with international companies.
Out of over 1,000 active IT companies, several are world leaders in their product niches and other provide services to leading corporations of the world. Seven leading multinational companies have located their development centers in Pakistan. Now this growth and expansion is threatened by the imposition of the GST on computers and other taxes and levies on call center equipment.
Keeping in view the circumstances, the IT ministry has proposed withdrawal of GST on computers; exemption of duties/taxes on import of call center equipment and other incentives, officials added.
Source: Business Recorder