FBR suggests to impose tax on digital companies like Google & Facebook in Pakistan. In order to expand the web of country’s tax to foreign entities, FBR has proposed to tax international tech giants like Google, Facebook, Uber and other tech companies who are earning revenue from Pakistan.
In this regard, FBR shares proposal in which it is proposed there will be 5% tax on all entities who are earning cash by sharing the data of Pakistani users or via direct advertisement based on their digital revenues in Pakistan.
Interestingly, when Dr. Mohammad Iqbal, Member Inland Revenue Policy at FBR, briefed the Senate’s Standing Committee on the Board’s proposal, in response, the committee rejected FBR’s proposals.
The committee remarked that decision of imposing tax on foreign tech giants will discourage and effect foreign investment. Moreover, it will also deject Pakistan’s digital revolution.
Now, after senates’ rejection, it is up to the National Assembly whether to approve or reject the opening of these new tax bills.
On the other hand, FBR has also recommended that it should have the right to state any foreign business as fake, under discussion of whether the company evades paying taxes in Pakistan and holds little to no economic value.
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Proposal and Reservations
Apart from imposing tax on tech giants, the Revenue Board also proposed to take off-shore tax controlled companies under the tax net.
Dr. Musaddiq Malik, member of the Standing Committee wasn’t agreed by FBR’s suggestions and said;
“If the FBR starts taxing the big data, this could undermine Pakistan’s ability to get benefit from the digital revolution. 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. Iqbal, however, said;
“Pakistan has to tax those who are earning billions of rupees from our country under the pretext of bringing foreign direct investment.”
It has been seen that some companies in Pakistan follow the strategy of splitting their business to avoid taxes. Hence, FBR proposed to bring these companies under the tax net as well. But, the committee rejected the proposal.
Another committee member remarked that this evolution will discourage capital formation in Pakistan and that FBR’s proposal is “anti-investment and anti-capital formulation.”
It is important to mention here that investment under CPEC is free from all kinds of taxes. Possibly FBR, with its new proposal is also considering to carry out this investment under the country’s tax net.
