The Federal Board of Revenue (FBR) is considering to impose a tax on offshore digital companies, including tech giants such as Amazon, Facebook, and Google in order to acquire share from earnings of these foreign entities. The tech companies are earning money in Pakistan mainly through advertisements. As per FBR rules, these companies are entitled to pay 5% tax on their total revenue in Pakistan. As part of the 2018-19 budgets, these taxes have recently been proposed before the parliament.
Dr. Mohammad Iqbal, Member Inland Revenue Policy at FBR, briefed the Senate’s Standing Committee on the Board’s proposal. He said Pakistan has to tax those who are earning billions of rupees from our country in the name of bringing foreign direct investment. However, tax proposals have been rejected by the Senate Standing Committee of Finance, terming it anti-business and anti-investment. We still have to see if these propositions get a go-ahead from National Assembly. The Senate committee argues that imposing taxes on digital companies will impact foreign investors negatively.
Dr. Musaddiq Malik, member of the standing committee said:
“If the FBR starts taxing the big data, this could undermine Pakistan’s ability to get benefit from the digital revolution.”
Dr. Malik further added, “It seems that the FBR has made the budget on the assumption that it can no more tax people in Pakistan and has decided to go after offshore jurisdictions.” Dr. Malik went to the extent of describing the Finance Bill as “anti-investment and anti-capital formulation”.
If the proposal is passed by the National Assembly, technology companies will have to pay 5% tax on money earned from user data or digital advertising in Pakistan, regardless of their bricks-and-mortar presence. The move also captures companies doing business in user data and online market places, such as Airbnb and Uber.
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