Tax exemption misuse: Senate panel voices concern over abuse of IT sector

ISLAMABAD: The Senate Standing Committee on Finance, while voicing its reservations over the statistics of the IT export proceeds provided by the State Bank of Pakistan (SBP), expressed apprehensions that other export sectors were using it for tax evasion.

In a meeting of the Senate Standing Committee on Finance held under the chairmanship of Senator Saleem Mandviwalla, the SBP official said that the total IT exports from Pakistan was $920 million.

He said that this amount was compiled on the basis of data provided by the banks.

Senator Anusha Rahman questioned the credibility of the data.

She said that in this amount there is no bifurcation that how much amount comes through the software exports or services provided by freelancers.

Rahman said because of the non-availability of authentic data of freelancers export proceeds, the government is finding it difficult to convince international payment platforms such as PayPal to start operations in Pakistan because they think that the consumer base for them is very small.

Chairman Committee Saleem Mandviwala said that a lot of textile mills have opened software houses and they were remitting a portion of their export proceeds in guise of IT exports.

Rahmansaid there is only one percent tax on non-registered freelancers and IT exporters and on registered freelancers the tax rate is mere 0.25percent, whereas, the tax rate on textile and other sectors is 30 percent.

She said there is a strong possibility that the exporters from other sectors might be using IT platform for tax evasion.

The SBP official said the banks were fully vigilant and responsible to find out that whether any exporter was misusing the IT platform for tax evasion.

He said so far, the SBPhad not find out any such dubious activity.

He assured the committee that from now onwards the SBP would bifurcate freelancers’ exports data on its website.

While discussing software exports over the last 15 years, the committee recommended the SBP to submit data with the clear categorisation of freelancers’ share in software exports.

The committee also recommended the non-inclusion of periodical and journal subscriptions in the IT services list.

Furthermore, the committee was briefed on the AI-based customs system introduced within the Export Facilitation Scheme.

Officials informed that the AI system has been introduced to upgrade the existing machine learning model in order to bring efficiency to Pakistan Customs.

Senator Mandviwalla inquired about the FBR’s plan to introduce AI in Pakistan Customs and its expected benefits for the business sector.

The committee recommended a detailed briefing on the inclusion of AI in Pakistan Customs, following the models of developed nations, in the upcoming meeting.

Copyright Business Recorder, 2025