In continuation of the previous Roundtable Conference held in August, 2015 the second meeting was held at the Arfa Software Technology Park on May 12, 2016. Representatives from more than 150 IT firms and academia attended the event. Moreover, official government representatives from key departments, including the Federal Ministry of Commerce, Punjab Revenue Authority and Punjab Board of Investment & Trade were also present and engaged in discussion regarding the Digital Punjab Campaign and the Punjab ICT Policy. Following are the key issues discussed during the meeting:
Agenda 1: Key Developments since the Previous Roundtable
Two key issues were raised during the previous roundtable, namely the issue of taxation and facilitation of visas for the IT industry.
Tax Issues: The participants were informed that based on the feedback, Punjab Government regressed the 19.5% Broadband Tax making broadband internet 20% cheaper in Punjab as compared to the other provinces. Furthermore, proposals are currently being considered to reduce the revenue tax from 8% to 2%. Also the tax holiday on IT exports is also likely to be extended for another three years.
Visa facilitation: With regards to the visa issues, PITB has reached out to the Ministry of Foreign Affairs and Mr. Sartaj Aziz has agreed to help facilitate the visa process for IT industry. While it was acknowledged that granting or rejecting visas is solely the prerogative of the host country, a letter of support/approval by PITB and the Ministry of Foreign Affairs can help expedite the process. The participants were apprised that formal meetings with the foreign office will be held in the coming months to further streamline the process.
Agenda 2: Access to Global Markets
Foreign Missions play a key role in marketing their products in the foreign markets. The participants were informed that the Ministry of Commerce has agreed to help market Pakistanâ€™s IT products abroad through its extensive network of commercial counsellors. In this regard, a meeting will be arranged in Islamabad between representatives of the IT industry and the newly appointed crop of commercial counsellors to make formal introductions and understand the due processes.
Agenda 3: Local Procurements
The attendees were informed that PITB has decided to collaborate with P@SHA to help local IT firms in public procurement projects at PITB. In this regard, the RFPs for the projects will be shared with P@SHA two weeks prior to its official announcement. This would help incorporate their feedback into the bidding process.
In order to further streamline the process, all companies that intend to bid on the RFPs would require a certificate of good standing from P@SHA so as to not only ensure quality, but also help consolidate data regarding the IT industry. Furthermore, it was suggested that, should it be required, PITB would consider breaking down large projects into smaller lots, to help facilitate smaller companies.
Agenda 4: Digital Punjab Campaign
It was announced that PITB, in collaboration with P@SHA, will launch the Digital Punjab campaign to market and promote our IT industry. It was discussed that such a campaign must have tangible deliverables that must be defined from the beginning in order to ensure effectiveness. It was also highlighted that in order for Digital Punjab to be successful in promoting E-commerce and E-knowledge, proper legislations need to be put in place to boost investorsâ€™ confidence. Moreover, it was suggested that the infrastructure and the quality of human resource need to be improved considerably if the campaign is to bring in consistent foreign investment. The participants were also informed that Government of Punjab is all set to launch free wi-fi facilities in three cities of Punjab, namely Lahore, Multan and Rawalpindi as part of the campaign.
It was also mentioned that Digital Punjab would be the starting point of a larger Digital Pakistan campaign, setting the tone for other provinces to follow. The participants were also informed that PITB is actively working with the KPITB and will continue to assist wherever the help is required.
Agenda 5: Taxation
Despite some development on this front, taxation remained a major agenda during the meeting. The inter and intra-provincial tax issues, reduction and removal of certain indirect and direct taxes and simplification of tax procedures were some of the major issues that were raised.
Federal/Provincial Jurisdiction: It was suggested that the lack of clarity and homogeneity between inter-provincial and federal-provincial tax policies acts as the biggest deterrent to foreign investment. It was argued that PRA and FBR need to be brought on a single platform to remove ambiguities and make the process simpler.
Tax for Start-Ups: While the decision to withdraw the broadband tax and proposals for reduction of revenue tax from 8% to 2% were appreciated, concerns were voiced regarding the ability of start-ups to pay even 2% tax during the initial years. The participants were informed that a proposal has been made to FBR, asking for a 5-year exemption on revenue tax for start-ups.
Indirect Taxes: A couple of other initiatives were also suggested to further bolster internet connectivity in the region. It was suggested that the tax on mobile data usage can be decreased to facilitate internet usage. Moreover, it was argued that high rates of consumer taxes are leading to consolidations by the companies resulting in loss of jobs; these could be reduced to increase investment as well as consumption of IT services.
Current Tax Figures: Officials from Punjab Revenue Authority apprised the participants that the tax paid by the IT industry has increased from Rs.300 million to Rs.850 million during the last fiscal year, showing a significant increase. The participants were also informed that the Punjab government intends to continue with its policy of zero-tax on IT exports and that PRA is committed to making the process efficient and less cumbersome. There is, however, still a very strong need still for the IT industry to establish a strong case of the benefits to common man, in order to qualify for more benefits.
Agenda 6: Special Economic Zones:
The participants were informed that PITB, under the Punjab ICT Policy, is considering the establishment of special economic zones for the IT industry, allowing for special incentives for the sector. It was mentioned that land has already been allocated by the government for SEZs and a case shall be made for the establishment of such zones for the IT sector. Representatives from the Punjab Board of Investment & Trade also briefed the attendees regarding SEZs and showed their willingness to help PITB in facilitating the process.
Another suggestion was made that the government should declare all special economic zones as â€œsmart zonesâ€, thus ensuring that technology becomes a part of the overall industrial and economic setup in Pakistan.
Agenda 7: Miscellaneous Suggestions
Apart from the items already listed on the agenda, the participants also proposed certain other measures that should be considered.
Investment in Human Resource Development: It was suggested that in order to compete with Silicon Valley and other major players, Pakistan needs to invest in human resource development. This, it was argued, could only be achieved through investment in setting up schools and universities as well as faculty development. Only through investment in education can we compete with the likes of TATA etc. in the global market.
Establishment of a Complaint Hotline: It was argued that taxation and legal processes are ambiguous which lead to harassment of call centres and software houses. To counter these issues, it was suggested that a hotline be set-up to note down complaints and forward them to PRA and P@SHA for necessary action.
Establishment of Incubators in Smaller Cities: While incubators have been established on strong foundations in big cities such as Lahore, Karachi, Rawalpindi etc., it was suggested that PITB and P@SHA should share their resources and expertise with smaller universities to set up incubators in small cities and promote entrepreneurship in relatively less-developed regions. Another suggestion in this regard was to add a product through the Bank of Punjab to provide funding for smaller start-ups.
Incentives for Job-Creation: It was argued that R&D companies are eligible for up to 75% tax break. Such incentives need to be extended for job creation as well, as it would create a vested interest for investors to set-up businesses in the country to qualify for such breaks.
Encouragement of E-Payment Solutions: It was argued that the biggest hindrance to the presence of Pakistani IT and E-commerce firms in the global market is the lack of willingness on part of international players such as Paypal, Amazon etc. to come to Pakistan. These firms and development/facilitation of reliable and internationally accepted e-payment solutions was deemed essential for the growth of local firms.