News Analysis |
As if undue taxation was not already a national crisis, the government of Pakistan has proposed taxes on digital revenues, targeting tech giants like Amazon, Facebook and Google. Also, the government is moving to encapsulate off shore firms to get Chinese foreign firms earning revenues off of Pakistani soil into the tax net. The tax structures proposed have been put forward as part of the 2018-19 budget and are under the scrutiny of the Senate standing committee on finance.
The Senate has rejected all proposals of taxing digital giants but the government won’t back down. The government wants to tax the digital advertising space along with hosting and maintenance of websites to tax the revenues of tech companies like Google and Yahoo, said Dr Mohammad Iqbal, Member Inland Revenue Policy of the FBR in a briefing to the standing committee.
If the resolution is adapted by the lower house, tech firms will have to pay 5% tax on money earned from user data or digital advertising in Pakistan, regardless of their physical establishment and the taxes paid on their occupations. The move also captures companies doing business in user data and online market places, such as Airbnb and Careem.
The government of Pakistan and the ministry of Information Technology have not yet addressed this issue and the possible threats it could pose.
The new tax proposal is a departure from the current system under which companies are taxed on profits where they are headquartered, often in countries offering lower tax rates.The Prime Minister’s office issued a statement denouncing this move.
Read more: Silicon Valley spat: Google vs. Amazon
“If the FBR starts taxing the big data, this could undermine Pakistan’s ability to get benefit from the digital revolution,” said Dr Musaddiq Malik, member of the standing committee and spokesman of the prime minister.
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 ‘draconian’, a local publication reported. The standing committee rejected the FBR’s budget proposal to tax tech giants but it will not have the material effect on the tax body’s plans. In case of the Finance Bill, the Senate cannot vote.
There is also a more worrisome trend circulating tech giants; especially with an interactive user base and data mining structures that need the attention of the government. With Facebook’s turmoil with Cambridge Analytica and the admittance to mass data leaks for political purposes, the world is cautious. International publications suggest that this data leak could possibly affect the upcoming general elections in Pakistan.
The tax structures proposed have been put forward as part of the 2018-19 budget and are under the scrutiny of the Senate standing committee on finance.
While that may be a theory, Pakistan’s cab revolution leader Careem recently admitted to massive data leaks and various users deleted the application. It’s not imminently clear whether data related to Pakistani customers and riders were also compromised but its safe to say, everything stored online has increasingly become unsafe.
While speaking to a local publication, a Careem spokesperson stated that “at the time of the attack on January 14, Careem had 14 million customers worldwide and 558,000 captains on its platform. Those who have signed up since then are not affected by the breach. The government of Pakistan and the ministry of Information Technology have not yet addressed this issue and the possible threats it could pose.