Pakistani government proposed 5% tax in terms of digital revenues, hitting US tech giants like Amazon, Google, and Facebook, while also moving to bring offshore-controlled companies in its tax ambit in an apparent attempt to tax Chinese earnings from Pakistan.
The tax measures have been laid before the parliament as a part of the Budget 2018-19, which is currently being discussed by the Senate Standing Committee on Finance. While the standing committee rejected all such tax proposals, If the proposal is passed by the National Assembly of Pakistan, tech-companies will have to pay 5% tax on money earned from user data or digital advertising in Pakistan.
“If the FBR starts taxing the big data, this could undermine Pakistan’s ability to get benefit from the digital revolution,” said by the member of the standing committee and spokesman of the prime minister of Pakistan, Dr. Musaddiq Malik.
The PM’s spokesman also came down hard on the FBR and said that Pakistan was not a tax-liberal country and its tax laws were drastic.
“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,” said Dr. Malik.
On the other hand, Dr.Iqbal said that the FBR will have a right to declare a business transaction by a foreign entity fictitious if it deems fit that the transaction does not have economic value and is only aimed at avoiding taxes,He said that the amendment has been proposed after a foreign entity sold its Rs10-billion company at Rs85 billion to another entity to avoid Rs20 billion in taxes.
Senator Mohsin Aziz said in a statement that “The budgetary proposals suggest that the FBR has concerns regarding foreign friends that are investing in Pakistan,” indirectly referring to China.
The investments that fall under the CPEC are exempted from all types of income tax, sales tax, customs duty and regulatory duty.