The IT industry has rejected the new Final Tax Regime (FTR) as equivalent to a tax credit scheme.
According to the IT industry, conditions in the FTR system are very similar to the tax credit scheme which was abolished by the previous government after the demand of the industry. The sector says the government measures are against ease of doing business and frequent policy changes are affecting investment in the IT sector.
While talking to ProPakistani, Ex-chairman of PASHA, Ahmed Syed, said that Imran Khan’s government had announced a tax exemption scheme by abolishing the tax credit scheme. The present government had initially promised to continue the same tax exemption scheme but after that, it introduced the FTR system.
He said that in the tax credit scheme if the inspector had cleared the IT companies, they would have received 100 percent tax credit. Now, under the new FTR system, IT companies will have to pay 0.25 percent tax even after getting clearance from the Inspector.
Ahmed Syed said that there was no inspection in the tax exemption scheme, while under the FTR system, companies or their representatives would have to appear before the FBR inspector, and if the official is not satisfied, companies will have to pay a 1 percent tax.
Although the tax rate is not very high, the involvement of human factors has increased the chances of corruption. Inspectors have been harassing companies in the past. There have been incidents in the past where FBR inspectors have refused to accept companies as IT firms. If companies are registered and brought into the tax net, companies pay four to five different types of taxes, but the government is losing billions to collect Rs. 6 to 7 million in taxes, he added.
The FBR had issued an explanation regarding the IT tax, but the industry said that this explanation was an attempt to justify the FTR system.