Taxing high-tech
OUR economy was never famous for high technology and even in services as a whole the largest export is ‘military services’.
This basically comprises reimbursements under the Coalition Support Funds which are oddly classified as an export. But in recent years, software exports and the IT industry more generally had begun to show signs of vitality, although not of the kind that would indicate that it is on the verge of any major boom.
Then the inevitable happened and the government imposed an 8pc tax on the sector which more or less muzzled growth.
The first six months of the current fiscal year show software exports down from the corresponding period last year, and industry representatives are saying they can easily relocate to Dubai.
Software exports have been tax-exempt in Pakistan, a practice that is not uncommon around the world. If Pakistan is to move away from cotton as a mainstay of its economy, then the government will need to find a way to look at high-tech industries as more than just revenue cows.
The pattern of swooping down with revenue demands on any sector that shows signs of vitality is a common one in this country. Such ad hoc measures help keep our economy perpetually stuck in bread-and-butter industries.
It is sad to see military services as our top services export. A few years ago, the telecom sector was targeted with a very large tax liability that turned out to be more or less frivolous.
Such cases are common, but due care needs to be taken that signs of vitality in high-tech industries are not choked off through them.
It is true that some fraudulent elements have availed themselves of the tax exemptions traditionally enjoyed by the IT sector, and the answer to that is greater oversight, not blanket new taxes for everybody.
The software industry attracts some of our finest entrepreneurial talent. Government policies ought to be designed to encourage their enterprise, and not milk it for revenue.
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