The FBR's plan to tax foreign digital services was postponed by the Senate committee.
The FBR and Ministry of Finance were planning to tax foreign digital services in Pakistan; however, the Senate Standing Committee on Finance asked serious questions about the consequences of it. FBR has proposed taxing all digital services like Netflix, Steam, Epic Games, Amazon Prime, etc. at around 5%, which will increase their prices by around 5%. As of today, when Pakistani citizens purchase digital services in Pakistan through Pakistani debit cards or credit cards, there are three kinds of taxes: FED, conversation tax, and bank transactions, and overall, it charges around 4.5% taxes for filers, and non-filers are taxed around 10%. Therefore, the taxes would increase to almost 10% for filers, and non-filers would have 15% taxes. This will be one of the highest taxes in South Asia for purchasing a service digitally in Pakistan through a Pakistani bank debit card or credit card.
The Senate Committee on Finance was of the view that this requires a detailed discussion and briefing on this, as it cannot be included in the budget proposal or finance act. However, the FBR contested that this would reduce the tax collection that the FBR predicted, and then it would have to be adjusted from some other avenue. Even Finance Minister Ishaq Dar said that if taxes are reduced or rejected by the Senate Committee and NA Standing Committee, then, of course, the government of Pakistan would have to focus on other alternative avenues as well. Moreover, the Senate Standing Committee on Finance was of the view that current taxes fall under provincial authorities as well; that is why the proposal, including other things, has to be set on record to approve this. However, the FBR again contested that this decision could cause an FBR tax collection shortfall. The Senate Standing Committee on Finance told the FBR to bring the proposal after the finance budget is passed; only then can the matter be discussed.
