IT companies relocating as Pakistan gets tax-hungry

[Zibago]

IT companies relocating as Pakistan gets tax-hungry
Nearly 40% of Pakistan’s companies that provided IT services have moved their business to the United Arab Emirates, largely due to the 8% additional tax on revenues levied by the government in 2015-16, said Sajjad Syed, chief executive officer of Excellence Delivered (ExD) Private Limited .

ExD outsources non-core operations and is currently working with consultants. Their primary job revolves around helping businesses in structuring IT systems and solutions.

But the levy of 8% additional tax has not just hindered the growth of such companies, but forced them to move elsewhere. “The decision of imposing tax on IT services to generate additional revenues is actually proving to be fatal as several small companies have moved their offices to Dubai, a tax haven and only 1.5 hours away from Pakistan,” Syed said in an interview with The Express Tribune.

“This will not bode well for the IT sector as the growth of this booming industry has already been stunted and companies are seriously re-evaluating their expansion plans in Pakistan.”

Syed, who has previously worked as managing director of German company Systems, Applications and Products (SAP) for Pakistan and Afghanistan, added that examples of such draconian tax measures are hard to find. “There is no other country in the world which has levied tax on revenues of IT services companies.

“As a matter of fact, they are subsidising the IT sector. We are not demanding a subsidy but such high rates of tax are hurting growth prospects.”

Syed said companies now prefer working on a cash-based system, which is hurting whatever tax revenue projections the government had made. “It is Dubai that is seeing an increase in employment and business – not Pakistan.”

While most officials have appreciated the growth of the IT industry in recent years, there remains a need to keep progressing in the area. Syed stressed on the need to conduct a formal study that would capture the size of the industry.

“Its contribution could be in danger as companies that have moved to Dubai have little compulsion to hire a Pakistani, they can hire an Indian or Sri Lankan for the same job,” Syed said. “We are moving our capital to Dubai and employment to India.”
IT companies relocating as Pakistan gets tax-hungry - The Express Tribune

 

[Areesh]

Shabash Ishaq Dar. Slow claps for you.

 

[Talwar e Pakistan]

IT companies relocating as Pakistan gets tax-hungry
Nearly 40% of Pakistan’s companies that provided IT services have moved their business to the United Arab Emirates, largely due to the 8% additional tax on revenues levied by the government in 2015-16, said Sajjad Syed, chief executive officer of Excellence Delivered (ExD) Private Limited .

ExD outsources non-core operations and is currently working with consultants. Their primary job revolves around helping businesses in structuring IT systems and solutions.

But the levy of 8% additional tax has not just hindered the growth of such companies, but forced them to move elsewhere. “The decision of imposing tax on IT services to generate additional revenues is actually proving to be fatal as several small companies have moved their offices to Dubai, a tax haven and only 1.5 hours away from Pakistan,” Syed said in an interview with The Express Tribune.

“This will not bode well for the IT sector as the growth of this booming industry has already been stunted and companies are seriously re-evaluating their expansion plans in Pakistan.”

Syed, who has previously worked as managing director of German company Systems, Applications and Products (SAP) for Pakistan and Afghanistan, added that examples of such draconian tax measures are hard to find. “There is no other country in the world which has levied tax on revenues of IT services companies.

“As a matter of fact, they are subsidising the IT sector. We are not demanding a subsidy but such high rates of tax are hurting growth prospects.”

Syed said companies now prefer working on a cash-based system, which is hurting whatever tax revenue projections the government had made. “It is Dubai that is seeing an increase in employment and business – not Pakistan.”

While most officials have appreciated the growth of the IT industry in recent years, there remains a need to keep progressing in the area. Syed stressed on the need to conduct a formal study that would capture the size of the industry.

“Its contribution could be in danger as companies that have moved to Dubai have little compulsion to hire a Pakistani, they can hire an Indian or Sri Lankan for the same job,” Syed said. “We are moving our capital to Dubai and employment to India.”
IT companies relocating as Pakistan gets tax-hungry - The Express Tribune

Ouch... Instead of raising taxes we need to lower them - this goes for the 99% of Pakistanis who dont pay them as well. Raising taxes isnt going to get us more money; only lose more tax payers. We also need to encourage paying taxes in the Mosques, schools and media.

 

[Jazzbot]

All credit to Mr. Dollar Dar..

@Muhammad Omar @cb4 @Tameem @Fracker @Viper0011.

“There is no other country in the world which has levied tax on revenues of IT services companies.

“As a matter of fact, they are subsidising the IT sector. We are not demanding a subsidy but such high rates of tax are hurting growth prospects.”

And they are dreaming of making Pakistan the next IT hub in the world. Yet another policy of PML-N that is hurting Pakistan badly, and helping India..

 

[Echo_419]

IT companies relocating as Pakistan gets tax-hungry
Nearly 40% of Pakistan’s companies that provided IT services have moved their business to the United Arab Emirates, largely due to the 8% additional tax on revenues levied by the government in 2015-16, said Sajjad Syed, chief executive officer of Excellence Delivered (ExD) Private Limited .

ExD outsources non-core operations and is currently working with consultants. Their primary job revolves around helping businesses in structuring IT systems and solutions.

But the levy of 8% additional tax has not just hindered the growth of such companies, but forced them to move elsewhere. “The decision of imposing tax on IT services to generate additional revenues is actually proving to be fatal as several small companies have moved their offices to Dubai, a tax haven and only 1.5 hours away from Pakistan,” Syed said in an interview with The Express Tribune.

“This will not bode well for the IT sector as the growth of this booming industry has already been stunted and companies are seriously re-evaluating their expansion plans in Pakistan.”

Syed, who has previously worked as managing director of German company Systems, Applications and Products (SAP) for Pakistan and Afghanistan, added that examples of such draconian tax measures are hard to find. “There is no other country in the world which has levied tax on revenues of IT services companies.

“As a matter of fact, they are subsidising the IT sector. We are not demanding a subsidy but such high rates of tax are hurting growth prospects.”

Syed said companies now prefer working on a cash-based system, which is hurting whatever tax revenue projections the government had made. “It is Dubai that is seeing an increase in employment and business – not Pakistan.”

While most officials have appreciated the growth of the IT industry in recent years, there remains a need to keep progressing in the area. Syed stressed on the need to conduct a formal study that would capture the size of the industry.

“Its contribution could be in danger as companies that have moved to Dubai have little compulsion to hire a Pakistani, they can hire an Indian or Sri Lankan for the same job,” Syed said. “We are moving our capital to Dubai and employment to India.”
IT companies relocating as Pakistan gets tax-hungry - The Express Tribune

Good to see Pakistanis Investment in Indian IT sector
Hopefully Pakistani IT companies will make a name for themselves in India,like they did in the Pharma sector

 

[Viper0011.]

All credit to Mr. Dollar Dar..

@Muhammad Omar @cb4 @Tameem @Fracker @Viper0011.

And they are dreaming of making Pakistan the next IT hub in the world. Yet another policy of PML-N that is hurting Pakistan badly, and helping India..

So per your logic. the country should remain like a Jungle right? Where everyone with power is like a lion, and can evade all laws, Taxes and everything else that a country needs to grow!!!! Or, they can come to the US and pay about $ 35% tax, both in personal and corporate income

These companies "leaving Pakistan" will be eaten alive by their competitors in India . I can guarantee it without even thinking twice. When people become so focused on making money that they forget their national obligations about paying Taxes, sharing wealth with their poor, and giving back to the society, those people aren't helping their country or the nation. They are simply money hungry bast*ards who've stolen billions from the nation's taxes every year and when now comes the time to pay taxes, they want to leave.

These threads you open, are useless and they don't promote nationalism and common sense. In the US, billions of dollar are donated by the rich to schools, hospitals, research and all. I don't think majority of the Pakistanis even do 5% of their income for better good outside of traditional religion donors. This thread here, is a prime example of it!!!!!

 

[Sinnerman108]

IT companies relocating as Pakistan gets tax-hungry
Nearly 40% of Pakistan’s companies that provided IT services have moved their business to the United Arab Emirates, largely due to the 8% additional tax on revenues levied by the government in 2015-16, said Sajjad Syed, chief executive officer of Excellence Delivered (ExD) Private Limited .

ExD outsources non-core operations and is currently working with consultants. Their primary job revolves around helping businesses in structuring IT systems and solutions.

But the levy of 8% additional tax has not just hindered the growth of such companies, but forced them to move elsewhere. “The decision of imposing tax on IT services to generate additional revenues is actually proving to be fatal as several small companies have moved their offices to Dubai, a tax haven and only 1.5 hours away from Pakistan,” Syed said in an interview with The Express Tribune.

“This will not bode well for the IT sector as the growth of this booming industry has already been stunted and companies are seriously re-evaluating their expansion plans in Pakistan.”

Syed, who has previously worked as managing director of German company Systems, Applications and Products (SAP) for Pakistan and Afghanistan, added that examples of such draconian tax measures are hard to find. “There is no other country in the world which has levied tax on revenues of IT services companies.

“As a matter of fact, they are subsidising the IT sector. We are not demanding a subsidy but such high rates of tax are hurting growth prospects.”

Syed said companies now prefer working on a cash-based system, which is hurting whatever tax revenue projections the government had made. “It is Dubai that is seeing an increase in employment and business – not Pakistan.”

While most officials have appreciated the growth of the IT industry in recent years, there remains a need to keep progressing in the area. Syed stressed on the need to conduct a formal study that would capture the size of the industry.

“Its contribution could be in danger as companies that have moved to Dubai have little compulsion to hire a Pakistani, they can hire an Indian or Sri Lankan for the same job,” Syed said. “We are moving our capital to Dubai and employment to India.”
IT companies relocating as Pakistan gets tax-hungry - The Express Tribune

Kudos to the government whose most technical achievement is to launch yellow cab schemes.

Our government fails to tax agricultural, property sectors ( which are dependent on ill educated people )
and taxes the only industry which was consuming our educated lot.

 

[Rajput_Pakistani]

So per your logic. the country should remain like a Jungle right? Where everyone with power is like a lion, and can evade all laws, Taxes and everything else that a country needs to grow!!!! Or, they can come to the US and pay about $ 35% tax, both in personal and corporate income

These companies "leaving Pakistan" will be eaten alive by their competitors in India . I can guarantee it without even thinking twice. When people become so focused on making money that they forget their national obligations about paying Taxes, sharing wealth with their poor, and giving back to the society, those people aren't helping their country or the nation. They are simply money hungry bast*ards who've stolen billions from the nation's taxes every year and when now comes the time to pay taxes, they want to leave.

These threads you open, are useless and they don't promote nationalism and common sense. In the US, billions of dollar are donated by the rich to schools, hospitals, research and all. I don't think majority of the Pakistanis even do 5% of their income for better good outside of traditional religion donors. This thread here, is a prime example of it!!!!!

Respected Mr. Viper,
Corporate tax is one thing and income tax another.
The government is increasingly burdening those, who are already registered and paying taxes. Both corporate as well as income. Combine that with 15 to 19% GST being paid by every Pakistani on each and every product and services.
The sectors, which traditionally are vote bank of PMLN like traders & whole sellers of large markets of Lahore, Karachi are getting away with each and every kind of tax. There is no documentation, what so ever of these sectors. Imagine, a market like Liberty in Lahore paying combine tax of few lac rupees every year?
Is it a joke or not?
Each shop a day has an average turn over of millions of rupee here. Where are income tax department and FBR, when getting income tax from these powerful groups and large land owners?
Already a Country, where industries are getting closed due to energy crisis and extra government taxes, jobs are getting dried up. And instead of increasing the tax base, government is scaring away companies.
No justification at all, there is none.

 

[GreenGuy]

IT companies relocating as Pakistan becomes tax hungry or they just flying out just because after june 2016 IT services will have tax enabled on them.

Not sure if they have amended this or there is still no tax till june 2016.

I have seen freelancers to be the most reluctant ones in paying taxes.
Why cant you just pay a little money to your country from the money you are earning?

Have a big heart at least for your country.

 

[American Pakistani]

Dumb@$$ govt.

Instead of taxing agricultural mafia, they start taxing IT industry which will have negative impact on educated people as well as industrial output.

Shame.

 

[Jazzbot]

IT companies relocating as Pakistan becomes tax hungry or they just flying out just because after june 2016 IT services will have tax enabled on them.

Not sure if they have amended this or there is still no tax till june 2016.

I have seen freelancers to be the most reluctant ones in paying taxes.
Why cant you just pay a little money to your country from the money you are earning?

Have a big heart at least for your country.

Being a freelancer, we already suffer a lot because we have no proper payment gateways (paypal etc) available to us and our banking system sucks (can't accept direct payments in our bank). So we either have to opt for expansive wired transfers (Western Union etc) or try adopting illegal ways. Then when we are finally able to get the payment (through illegal ways), how you want us to pay tax on that money? Not to mention the tricky questions we have to answer to banks and other govt institutes when we tell them about the money we earned.

So per your logic. the country should remain like a Jungle right? Where everyone with power is like a lion, and can evade all laws, Taxes and everything else that a country needs to grow!!!! Or, they can come to the US and pay about $ 35% tax, both in personal and corporate income

These companies "leaving Pakistan" will be eaten alive by their competitors in India . I can guarantee it without even thinking twice. When people become so focused on making money that they forget their national obligations about paying Taxes, sharing wealth with their poor, and giving back to the society, those people aren't helping their country or the nation. They are simply money hungry bast*ards who've stolen billions from the nation's taxes every year and when now comes the time to pay taxes, they want to leave.

These threads you open, are useless and they don't promote nationalism and common sense. In the US, billions of dollar are donated by the rich to schools, hospitals, research and all. I don't think majority of the Pakistanis even do 5% of their income for better good outside of traditional religion donors. This thread here, is a prime example of it!!!!!

You and your patwari logics. Giving subsidy to IT sector is like making the country into a Jungle. But giving lavish subsidies, in fact, running entire project on subsidy is most sane thing to do. (hint metros).

 

[Sheikh Rauf]

Ishaq dar is ki aulad or khandan ko haram khanay ki adat per gaye hai..
Jehanum ka aindhan bilashubha.

 

[tested]

And they are dreaming of making Pakistan the next IT hub in the world. Yet another policy of PML-N that is hurting Pakistan badly, and helping India..

How are they helping India? Or is this a default statement over everything wrong that happens in Pakistan?

There's like a hundred countries out there in the global IT sector, not to mention IT markets worth hundreds of billions of dollars that India has not cracked - like the Chinese IT market.

 

[Viper0011.]

Being a freelancer, we already suffer a lot because we have no proper payment gateways (paypal etc) available to us and our banking system sucks (can't accept direct payments in our bank). So we either have to opt for expansive wired transfers (Western Union etc) or try adopting illegal ways. Then when we are finally able to get the payment (through illegal ways), how you want us to pay tax on that money? Not to mention the tricky questions we have to answer to banks and other govt institutes when we tell them about the money we earned.




You and your patwari logics. Giving subsidy to IT sector is like making the country into a Jungle. But giving lavish subsidies, in fact, running entire project on subsidy is most sane thing to do. (hint metros).

You are twisting my logic pretty badly into your propaganda and its not making any logical sense. Let's break it down. And I'll try to address it from your business's standpoint, so you'll see how things connect.

1) So you are a freelance....just like you said, if there were e-commerce banking systems, financing and all available to you, don't you think you'll have a ton more opportunity to work as a free lancer and then actually form a business that can grow beyond where you may be? This is the "opportunity" I mention a lot in my post. India just launched a 1.5 trillion rupees worth of program for early startups to get funding. Why? Because they get it, the youth, young generations are the ones with ideas, positive energy and all. So they'll make things happen in the future. But why India is able to do it and Pakistan can't even have a better banking system?????

The answer is where you and I differ. You'll call me a PMLN supporter and all. While, its not true. I am a growth supporter, an opportunist and a capitalist. BUT, not for myself. I believe in the entire humanity and that everyone should have a shot at opportunity. Which is where it sucks for smart people like yourself in Pakistan. So let's put IK and everyone else on the side. Let's talk about human development challenges for once.

2) So to the topic, why hasn't there been an opportunity yet? Because no one has done shiit to bring opportunity to Pakistan. That includes PMLN's last tenure. I blame them half (for their shares of drama) and I blame the military the rest of the half (who never let any civilian system develop till now) and there was no focus on human development.

So what never got done in the past 70 years, is now happening on steroids. In other words, nations develop overtime. Homes are built in phases like from designing the architecture first, then prepping the ground next, then, the foundation, the walls and the rooms take shape. Then, the finish and the furniture is brought in. Here, the home called Pakistan is being built ALL at once by the current government. Why?

Because 1: No one did shiit in the past 70 years. And 2: if these guys don't deliver, they'll become history like Zardari and they know it too. So the expectations are that in 5 years, these people need to do what hasn't happened in the previous 70 years.

3) For every country to grow and build, the taxation is a must. Without taxation, a government can't build schools, provide healthcare, build infrastructure and will ALWAYS remain under debt and loans. Same stuff I've seen many people bitching about without realizing that no one's done shiit in the past 70 years to even build a tax base and do projects to grow the human capital.

So you guys aren't used to taxes as there are less then 1% of the population who pays them !! Now take a look at the wealth......across the globe, in every stable country, the government is MUCH richer than the entire population. Only in Pakistan and a few countries like her, the government is MUCH poorer than the population. Why? Because no one paid taxes!!!!

So taxes mean, less to no debt in the long run (if your economy is doing good and people like YOU, have opportunity). Now, taxes and a tax based economy where numbers, when correct and verifiable in terms of the actual GDP, the investment houses go crazy on an expanding market (Pakistan has a shadow economy because of non-tax compliance by about 50 MILLION people!!!!). So if you project the real or close to the real size of income and the economy of Pakistan, the size AS-IS should be close to $ 600 - 800 billion!!!! Right now, it was around $ 300 billion.

4) With this actual size of the economy when the shadow economy becomes a part of the current real economy, you'd gain two things:
1: It's MUCH easier to grow a $ 600-700 billion economy to over $ 1 trillion. Like they say, the first million dollars are hard to make. Then, its much easier to multiple, and takes like half the time to make multiple millions, than the time it took to make the first million (economies of scale, change the scale with money and opportunity the first million brings to you)
2: When you project the size to the word (proven through your tax system) to be close to 3/4th of a trillion (close to a trillion), the global investment homes go "buy, buy, buy" (a famous phrase if you've ever worked in Wal street, referring to the Bull market).

Think about it. You guys call the current rulers "corrupt" and all. They already HAVE all the money to do corruption, without even doing the CPEC and other big projects. So why take so much time, pain and all, to build these things when they could be sitting in their palaces every day, without doing anything and STILL make billions like Zardari did????? The answer is, because they are NOT making $$$$ this time. This time, they want their names on the seal of a Regional Power called Pakistan and that they developed it (which would be true, no matter how you see it, these projects were started by them, the life changing investments were negotiated and brought by them). I am not asking you to change your political affiliation or the right to criticize, I am JUST explaining to you what they are really doing. And you should give credit to who deserves it.

5) Do you rally think they will KEEP taxes on IT services? . NO!! They aren't stupid. They are working on all these projects to CREATE millions of new jobs. How is it that they'll destroy the most significant revenue generation tool called the IT services industry????

But the most important need is to establish a core economy size and it is MUCH needed for every type of growth. Once they establish a tax base and a REAL size of the Pakistani economy, then, there will be SERIOUS benefits provided to the services sector (specially IT and Medical) as that's where Pakistan will excel due to educated labor. There will be "startup tax breaks" and business parks and areas where anyone can start business without taxes for a few years to establish themselves.

Just so you know, when I started my first company many years ago, I paid 34% of taxes on my FIRST year of business!!!! This is just income tax, not including my property and capital gains. If you add that up, I paid about 54% of all my income that year in taxes!! And this is the US. The point is, to keep the US economically and socially and defense wise stronger, we ALL pay our share. And its not easy but you do it because you follow a system. I share my own examples, not to show off, but to tell you guys that a democratic system is THE most important thing for a society. Once its established, it'll take care of you. So let a tax base economy setup first.

6) Like I said before, before you start building a house, you need to understand the real value of the land which you want to buy. This process here that you were referring to, is exactly that. Once a broader tax base is established, they'll quickly move to ease taxes on certain areas like Free Lancing, IT services, Transportation, Shipping, Consulting, Startups and all. That's a given, no economy can survive without it and these people in power are all business. They know how to help grow businesses and create more jobs.

Right now, the idea is to tell the world about Pakistan's real economy and her size per tax base (and create "intrinsic value" if you've ever been in the financial industry and have followed Berkshire Hathaway and Warren Buffet). Intrinsic value is what the trillion dollar investment companies use to pour ocean of billions into a country as investments, turning a country's economy within a decade into the top 20, which is what the current government is doing.

7) You are feeling the squeeze because the bad habits of not doing anything and paying no taxes has plagues your country for the past seven decades!! Now, if this is done right and a real tax base can be setup, your next generation and their future generations will thank you forever as this is the era when a modern Pakistan (economically and militarily strong) was given birth. For the past 70 years, a Pakistan has existed, without providing for its people and people paying back to Pakistan (their taxes). Time to fix all these things.

 

[Thəorətic Muslim]

“This will not bode well for the IT sector as the growth of this booming industry has already been stunted and companies are seriously re-evaluating their expansion plans in Pakistan.”

Kudos to the government whose most technical achievement is to launch yellow cab schemes.

You all need to relax. When the article talks about companies going "overseas" it just means their being registered in Dubai rather than in Pakistan. The workforce remains in Pakistan because lets face it UAE isn't going to give visas for Pakistanis to work in Pakistani owned IT companies registered in UAE.

Being a freelancer, we already suffer a lot because we have no proper payment gateways (paypal etc) available to us and our banking system sucks (can't accept direct payments in our bank). So we either have to opt for expansive wired transfers (Western Union etc) or try adopting illegal ways. Then when we are finally able to get the payment (through illegal ways), how you want us to pay tax on that money? Not to mention the tricky questions we have to answer to banks and other govt institutes when we tell them about the money we earned.

There are branches of the National Bank of Pakistan in the USA. You can sync your Paypal account to your bank account it's usually 2.9%.