Impact of Tax Exemption Removal

The Government of Pakistan announced that the tax exemption facility will be discontinued for the IT and ITeS industry. On March 20, it was announced that the decision has been taken place as Presidential Ordinance and will be applicable from Mar 22, 2021. There is a theoretical presumption that such changes should raise the overall size of the economy in the long term, though the effect and magnitude of the impact are subject to considerable uncertainty. IT industry, unlike traditional industries, operates differently. Changing the tax regime in the mid of the fiscal year, despite the original commitment till 2025, not only creates uncertainty and a state of panic about inconsistent policies but also raises questions about the understanding of the government about the gravity of the situation of how it will jeopardize the growth. P@SHA has been raising voice on the change of the tax regime at different levels. In continuation of the attempts to create awareness, P@SHA has compiled a brief report to create a better understanding of different stakeholders and analyze factors that are affected by the removal of tax exemptions. This report analyzes the factors that are affected by the removal of tax exemptions to proactively avoid the negative impacts.