Duty on IT Imports Hurting Industry Growth

Pakistan is one of the five countries in the world with highest import duties on IT products. This claim is made in a report by Express Tribune about global IT trade where 97% countries involved in the trade have abolished import duties.

Following are some startling facts regarding an agreement (to which Pakistan is a signatory):

• International Trade Agreement (ITA) was signed by 29 countries in 1996 as part of WTO. It decreed all signatories to remove all import duties from IT related products. Today, the signatories are 86 nations that cover 97% of global IT trade. Pakistan is also signatory of the agreement.
• Pakistan had removed duties back in 2001-2002 but placed them back in subsequent years
• The only entity really benefiting from these taxes is FBR as it probably helps it to meet tax collection targets (in 2013 FBR collection Rs 3.4 Billion Custom Duties and Rs 5.5 Billion Import Duties, unclear if these figures are specific to IT related imports)
• Philippines signed the agreement in 1997 and abolished duties over IT product imports. Multinational companies established companies there and today Philippines exports IT related products and solutions worth $25 Billion
• India signed the agreement in 1997 and abolished import duties as well. In 2000 the Indian IT exports were $5 Billion, in 2013 they are $51 Billion.
• Pakistan’s IT related exports are about $500 Million.

This report is important considering the 3G/4G roll out in Pakistan with $1.3 Billion investment by telecom companies over the next five years in import of telecom equipment. The import duties and taxes will cost them additional $190 million, a significant amount of money that’s making companies hesitant to invest at large scale.

Pakistan’s IT industry can grow phenomenally if tax hurdles are better managed by the government.

Khurram Zahid