The major papers in Pakistan reported today that the Federal Board of Revenue (FBR) has unearthed a whopping Rs. 60 billion or $375 million in foreign inflows to 75,000 individuals (read: ‘freelancers’) in Pakistan during the last two years.
If you think that this cash inflow either came via hawala, or maybe 75,000 individuals carried this cash in their pockets while returning to Pakistan from abroad, or even worse, they got this money into Pakistan by smuggling goods, then you are wrong. The fact is that these funds were brought into Pakistan through proper banking channels, and all the details are on the record.
To sensationalize the entire saga, the slumbering FBRÂ is pretending that it was unaware of this foreign inflow and was notified about it only today.
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It was FBR’s sheer incompetence that allowed the inflows to take place unnoticed, and they must be condemned for getting stories published in mainstream media with a narrative that indicates that this money was laundered in Pakistan and was only just caught by the most experienced and highly professional tax authorities of the county.
To clarify, this precious foreign inflow of $375 million has been brought in by young freelancers who provide their services to the world through Fiverr and other similar online freelancing websites. They get paid through Payoneer — a web-based digital wallet that allows them to transfer their earnings to their Pakistani bank accounts.
What is intriguing is if you divide Rs. 60 billion by 75,000 individuals, each freelancer made around Rs. 80,000 on average during the last two years, which might be far less than what they can make on average, but a certain FBR commissioner (who handles the off-shore inflows) thought of dramatizing this information to villainize the innocent and unsuspecting freelancers. He also intends to send notices to these 75,000 freelancers for tax evasion; such notices are likely to tell them to either pay their income taxes or face account attachment, penalty, or even imprisonment.
Imagine an 18 year receiving a notice of this sort from the FBR. The teenager is only going to panic and may offer the local FBR office a bribe in desperation, and this is probably what this whole charade has been designed to achieve. Otherwise, all this foreign inflow (or at least the majority of it) is tax exempted. Nonetheless, who is going to prove that the revenue had come through IT and IT-enabled services?
On the one hand, Prime Minister Imran Khan is eagerly seeking means to increase Pakistan’s foreign inflows, and on the other hand, the FBR is plotting to bar any foreign inflows because they like catchy headlines.
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What is being overlooked here is that these 75,000 freelancers have brought millions of dollars into Pakistan each year without any support from any government institute. Ideally, even if there is any taxable income, the freelancers in question should be exempted from it simply because the government has not provided a penny’s worth of support to them. Instead of subsidized electricity, Internet, payment gateway, or recognition as an industry; these young freelancers are not even allowed to open up bank accounts. Banks in Pakistan do not recognize freelancing as a profession and would never open an account because these young freelancers cannot provide “proof of income”.
With almost zero support from anyone, neither the government nor the FBR deserve to demand even a single rupee in taxes from the freelancers.
If this pattern continues, it will be crystal clear that the FBR and the government have decided to destroy the freelancers, and in doing so, they will obliterate the future of thousands of young Pakistanis.
I’ve no issues paying taxes if these guys would’ve supported at any stage. I can’t get a Home/Car loan, can’t get a credit card and Banks don’t consider my source of income valid yet these khoti day bachay have the audacity to demand taxes. Now only JS Bank started opening freelancer current accounts with which we might be able to get loans etc. but no other bank. Never SBP/FBR intervened. No one tried to facilitate freelancers. First, provide us the facilities and incentivize freelancers and freelancers will be more than happy to pay taxes.
There are no taxes on income earned from abroad via IT Enabled Services. By using ANY IT tech it is by definition IT Enabled. That means all of freelancers are income tax exempt.
Agreed with you. When you go to a bank and ask to open a bank account as a freelancer, you’re treated as a criminal and laughed out of the bank. We’re not being facilitated, we won’t be paying taxes.
Yes, I remember the Pakistani tax law that states you don’t have to pay taxes if a commercial bank denies you house loan.
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Ignorance of law is no excuse. We should first complete our responsibilities as citizens and declare all sources of income. Most freelancers provide IT services and income can be shown as such while filing tax returns. Freelancers have no objection when freelance websites charge their share, they should also be responsible enough to show this income in tax returns. Also the narrative that “FBR does not deserve to demand tax as they don’t facilitate freelancers”, applies to almost all industries in Pakistan. If same logic is used, no one should be paying taxes as citizens pay for almost all necessary facilities themselves, which is the job of govt. to provide us.
If we don’t fulfil our obligations, our criticism on ineptness of govt. will be hypocritical. Needless to say FBR including all govt. departments must adopt the culture of working in a “people friendly” manner and strive to be what they are supposed to be i.e. “Public Servants”