The federal government should levy a flat tax rate on both domestic and foreign IT incomes and facilitate easy access to funds, hardware, and overseas travel to companies and individuals paying this tax, according to Co-founder and Chief Executive Officer of Arbisoft, Yasser Bashir.
The top executive explained in a series of tweets how Pakistan can expand its IT-enabled services sector by discouraging tax holidays and instead offering workable incentives in the form of transparent facilities which would definitely help the sector grow.
As a software company operator, I have been a part of endless & futile discussions on how the government in Pakistan can expand its IT enabled services sector. A 🧵.
— Yasser Bashir (@yasserbashir) July 5, 2023
According to the Arbisoft CEO, the federal government should facilitate three types of movements that make it a lot easier for formalized, tax-paying companies to move funds, people, and hardware, which essentially creates an incentive for companies to formalize.
Facilities
- Movement of Funds: Keep track of what an IT company brings in as export proceeds to the country and let them move a significant chunk of it out without red tape.
The executive explained that one way for IT firms to grow is by acquisitions, and currently, it’s a nightmare to acquire a foreign company with money parked in Pakistan. As a result, most companies try to keep as many funds outside of the country as possible. “Let firms take out what they bring in,” he added.
- Movement of People: Yasser suggested mobilizing foreign offices and negotiating faster visa processing with foreign embassies for formal IT firms. Paradoxically, easier travel will discourage brain-drain which is the #1 factor hurting progress for local IT firms.
“Also make it super simple and fast for companies to bring foreign visitors in. Foreigners’ view of Pakistan changes radically when they visit us but it’s often painful to bring them in,” he remarked.
- Movement of Hardware: A laptop that costs $2000 in the US, takes 4 weeks and double the price to acquire in Pakistan. Why is this process the same for formal and informal firms? Use an import facility as an incentive for formalization and paying the flat tax, the executive explained.
He mentioned that there is a perverse incentive for IT firm employees to become remote freelancers to earn in forex and avoid all taxes. “Organizations do a lot more than just bringing in export dollars. Tax freelancers and IT employees consistently so that one sector doesn’t cannibalize the other,” said Yasser.
The Arbisoft CEO recommended making infrastructure mainly internet and office space more affordable.
“Last but definitely not the least, massively incentivize the private sector to invest in skills-based talent development. A large portion of students going to university can just get vocational training and become employable faster,” he observed.
In conclusion, Yasser opined that the bar for university admissions/graduation should be raised higher so that engineers can be easily separated from technicians. “Right now most universities produce neither good engineers, nor good technicians, because there is no distinction and the bar is low,” he added.
As long as govt stay away from IT sector people will be happy. They came as a PSEB and ruins the trust of freelancers.