Budget Proposals for 2011-12: PCA seeks drastic reforms in IT sector
by Ahmed Rayyan
IT sector in Pakistan is still nascent and needs to be patronized for a reasonable time period therefore the government ought to introduce drastic reforms and curtailed the tax rates on computer hardware equipments and accessories in the upcoming budget.
Pakistan Computer Association (PCA) in its budget proposal suggested the government to reduce the tax on computer screens and value-added products in order to increase the penetration of IT education in the small cities of the country.
The government should waive GST on computer screens couple with FED and import duties on different equipments, the body said.
The taxes and duties for this important sector of economy must be rationalized and government should announce computer and IT friendly policies in the budget 2011-12 because of the fact that computer and IT industry is considered as backbone of the economy in the countries who are rapidly on the path of progress and development.
The import of used IT equipment has played a vital role in the nation’s development. The imported used and low cost computers are used by IT educational institutions, middle class and lower middle class students and families. Likewise, hospitals, clinics, departmental stores and all types of small andmedium size business enterprises, even all types of schools, even madrisas depend on used computers due to affordability for the middle and lower middle class.
Used Computer System Imports
The industry is aware of the fact that the used IT equipment is not more than three years old and it still have a functional life of 5+ years and all available software can be operated on these machines and fulfills business and education needs at a very low cost. Thus, resale of used/Refurbished PCs is not only popular in developing countries like Pakistan but also in the developed nations like USA, England, Europe, Canada and Australia are widely using these computers.
According to a conservative estimate, Pakistan can save a huge foreign exchange by encouraging used computers and IT equipment as used computer cost on an average is less than $40 as compare to the cost of new ranges from $300 to $600. Currently there is no indigenous production of IT equipment and its parts in the country. Therefore, import of such equipment by no means is threat to any local industry. As said earlier there are only assemblers, some are small one having one shop and some have big installation, but both are assemblers and nothing is produced in our country.
Computer Usage
Majority of people belongs to middle class and lower strata of the society cannot afford a new computer at a price of 25,000 to 45,000/ and they opt for a used desktop PC at an average price of 5,000 to 10,000/-. The laptops market presents similar picture where average price of a Dual Core new laptop in HP/Dell/Acer is around 45,000 to 55,000/- whereas the same in used is available at a price of 27,000 to 30,000/- and in Centrino technology even more cheaper upto 22,000/-.
We simply cannot ignore the fact that Pakistan is a third world poor country and majority of the people are living below the poverty line and it is not possible for them to afford a new PC. It has been observed that a great number of students and professionals are using these used computers and laptops. The initial users and beginners don’t need a hi-fi computer rather a normal low-end PC works fine for this purpose.
Notwithstanding national needs and aspirations, some multinational firms engaged in computer hardware manufacturing are trying to get import of used IT equipment banned to make quick and big money. However, the sitting government ought to consider that any such ill-advised step would result in large public outcry and loss of precious foreign exchange.
The proposal of imposing any type of ban on used IT equipments is absolutely unnecessary as Pakistan is not producing / manufacturing any computer then what industry we are talking about: there are only assemblers. As a matter of policy we should not look at someone’s personal business or cartel of few companies, rather we should think about the wellness of majority, people at large and national interest.
Curb Smuggling and Afghan Transit Trade
PCA demands that the menace of growing smuggled goods in Pakistan from neighboring countries is also hurting the local business badly, which must be curbed as it discourages local manufacturers as well as documentation of business activities. Thus, it is causing huge loss to the government exchequer.
The duty structure of the goods prone to smuggling should be rationalized so that legal imports could be encouraged. He said that Afghan Transit Trade needs to be strictly regulated as it will help curbing the duty free smuggling of many items back to Pakistan.
The central president of PCA said that government should evolve a proper strategy for broadening the tax net instead of enhancing existing taxes. The ratio of direct tax should be improved to save mitigate the burden indirect taxes which add to miseries of poor masses.
Broadening of Tax Base
Instead of adding any further burden upon already heavily under burdened sectors of the economy, the government needs to broaden the tax base. The government should also curb tax evasion and give incentive to tax payers so that a tax culture could be flourished in the country.
Source: Daily Times
Date:5/28/2011
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