Pakistan’s IT industry stakeholders, including exporters, academia, and policymakers, have proposed transformative measures to digitize governance, regulation, and the economy. By establishing a National Data Exchange Layer and adopting the Pakistan Digital Stack, these initiatives aim to create a digitally inclusive and economically vibrant future.
Key Recommendations for Digital Transformation
Rationalizing Taxes on Digital Infrastructure
Simplifying tax policies is essential to fostering growth in the IT sector. The recommendations focus on:- Rationalizing all direct and indirect taxes on digital infrastructure.
- Benchmarking tax rates against global standards.
- Fixing sector-specific tax rates for at least 10 years to ensure predictability.
Lower Tax Rates for Digital Transactions
Introducing a 5% General Sales Tax (GST) on digital payments (as opposed to the current 18% on cash transactions) will:- Reduce operational costs for businesses.
- Encourage digital adoption.
- Formalize the economy while improving transparency and tax collection.
Reducing Corporate Tax Rates
Cutting Pakistan’s corporate tax from 29% to below 20% is a game-changer. This move will:- Attract foreign investors.
- Stimulate innovation and regional competitiveness.
- Boost job creation and Foreign Direct Investment (FDI).
Enhancing Digital Infrastructure
Expanding Internet Access and Smartphone Ownership
- Develop public-private partnerships (PPP) to increase internet access.
- Promote installment-based, low-cost smartphones, especially for women, to bridge the digital divide.
Simplifying Foreign Exchange Regulations
- Streamlining foreign exchange processes will enable international IT firms to establish operations, hire local talent, and contribute to economic growth.
Capping Payroll Taxes
Reducing payroll taxes for IT companies from the current 24-25% to 6-8% will:- Lower operational costs.
- Encourage reinvestment in talent and infrastructure.
- Make Pakistan more competitive with regional players like India.
Encouraging Startups and Venture Capital
Legal Reforms and Dispute Resolution
- Establish specialized commercial courts and Alternative Dispute Resolution (ADR) tribunals to expedite conflict resolution for international companies.
Capital Gains Tax Exemption for Startups
- A 20-year exemption on capital gains tax for tech startups will:
- Attract venture capital inflows.
- Make Pakistan competitive with global hubs like Singapore.
- A 20-year exemption on capital gains tax for tech startups will:
These recommendations, detailed in a white paper by P@SHA, form a comprehensive roadmap for Pakistan’s digital future. By fostering innovation, reducing tax burdens, and promoting inclusivity, Pakistan can unlock its potential as a global IT powerhouse.
Accelerating digital transformation is not just an economic imperative but a pathway to sustainable development and a prosperous future for Pakistan.
