Pakistan by signing the 2nd phase of the agreement has approved the move for joining the Information Technology Agreement (ITA). Federal cabinet’s formal announcement of decision is on its course.

Pakistan aimed to join Information Technology Agreement is to stimulate the IT sector by increasing investment in IT, telecom and e-commerce. Numerous job opportunities will be created in the country by this initiative. Former PM Nawaz Sharif had formed a committee of Secretaries counting secretaries from IT, commerce, several industries, and revenue division to assess ITA-II revealed by an official source.

Pakistan is among top 5 maximum import tax paying countries on IT products till date. Therefore, serious steps must be taken on part of government for tax relief to foster its growth. PM Abbasi will announce his final decision after the feedback from committee.

IT sector of Pakistan holds $2.8 billion in the global IT sales, out of which $1.6 billion contributed from IT and software products export. Widely held IT services extended as freelance making Pakistan a major freelance service providing country with having no Information Technology Agreement. Therefore, no export income was registered with the State Bank. Indian software exports after signing ITA grew tremendously to $82 billion in 2015 versus $565 million in 1999.

Federal Board of Revenue (FBR) does not approve tax elimination causing a revenue loss of Rs3 billion from deduction on customs duty and Rs6 billion in tax reduction. Ministry of IT, Ministry of commerce and industries’ secretaries are backing this decision.

Presently, 70% of IT products are being smuggled which include mobiles, computers, and accessories that will be minimized by ITA inclusion to gear up higher foreign direct investment in sector.

ITA commenced in 1996 at the first WTO Ministerial Conference in Singapore with 29 countries signing the agreement. Now it has 82-member countries containing nearly all IT product trading countries.

ITA works on the principle of removal of tariffs and duties on IT trading products. Members are required to follow the basic three rules:

  1. The products given must be included in the agreement
  2. All the listed products must be included
  3. All other duties and charges must be removed

Pakistan was approaching to get registered with ITA since 1997 but failed to execute it till date. For Pakistan, tariff reduction and all other taxes will be removed soon within next 3 years if the final decision is affirmative.