Latest news with #DigitalPresenceProceedsAct2025
Express Tribune
01-08-2025
- Business
- Express Tribune
Govt euphoric over US trade deal, but keeps terms under wraps
Finance Minister Muhammad Aurangzeb meets with US Secretary of Commerce Howard Lutnick during his visit to Washington. Photo: APP Listen to article As the government is tightlipped on the fine points of the US-Pakistan trade deal, background discussions suggest Washington might have gained market access at zero tariffs in return for investing in critical sectors and giving Islamabad favourable treatment compared to regional peers. Field Marshal Asim Munir's meeting with President Donald Trump and Pakistani negotiators' positive approach towards resolution of the issue before the August 1 deadline played a role in securing a better and early deal. Tariffs on Pakistani exports will be lower than regional competitors from South Asia and Southeast Asia, mainly India, Vietnam and Indonesia. Pakistan's chief negotiator, Finance Minister Muhammad Aurangzeb, termed it a "real win-win deal" for both the countries, which has protected Pakistani exports from retaliatory higher tariffs. But the final tariffs might be higher than the pre-retaliatory tariffs of around 9.8%. The US may now export goods to Pakistan at virtually zero rates but the effective date of the zero tariffs may be from July 2026 due to needed legislative changes, said the Pakistani authorities on condition of anonymity. No tariffs on US goods will be in the benefit of consumers who will have quality goods but still their prices might be more than Made-in-China goods. In return, the US tariffs on Pakistan will be lower than 29%, which President Donald Trump announced in April compared to the average 9.8% prevailing rates at that time. Aurangzeb said that the US will also invest "first in energy, then in minerals, mines, information technology, digital infrastructure and new economy". People privy to multiple rounds of trade discussions said on Thursday that the United States had set two key demands for a trade deal with Pakistan: lower tariffs on its exports to Pakistan to zero with total access to markets; and exemption to its companies from 5% tax imposed under the Digital Presence Proceeds Act 2025. Hours before President Donald Trump's announcement that his administration reached a deal with Pakistan, the Federal Board of Revenue issued a notification to withdraw the 5% tax. Commerce Secretary Jawad Paul, who was part of the negotiating team, did not comment whether Pakistan accepted the US demand for zero tariffs with complete market access. There was no formal announcement from either side on what tariff rate was agreed upon, but the Pakistani embassy in Washington said the agreement "will result in the reduction of reciprocal tariff (29%) especially on Pakistani exports to the United States". The deal was reached during a meeting of Aurangzeb, US Secretary of Commerce Howard Lutnick, and US Trade Representative Ambassador Jamieson Greer. Commerce Secretary Jawad Paul and Pakistan's Ambassador to the US Rizwan Saeed Sheikh were also present during the meeting. The sources said that Pakistan had expected that in return the US would set import tariffs in the range of 15% to 19%, preferably close to 15%, which is lower than the retaliatory rate but higher than the pre-April rates. Till the filing of the story no announcement was made either by the US or the Pakistani government about the final tariff for Pakistan. Pakistan also sought concessions for export of its agriculture products, said the sources. One thing was clear that Pakistan will not be at a disadvantageous position compared to regional countries due to its constructive approach in dealing with the issue, said another government official. One of the issues might be any concerns being shown by Pakistan's other trading partners. To deal with the matter, there is a possibility that both sides show intentions to sign preferential trade agreement or a free trade agreement, said the sources. President Donald Trump also talked about exploring Pakistan's oil reserves with US companies. A Petroleum Division official said that there was a possibility that any US company can participate in the upcoming offshore drilling. The Express Tribune reported last week that the Petroleum Division was seeking bids from interested investors to grant rights for drilling on offshore well and it would open the bids on October 31, 2025. The report further stated that earlier Oil and Gas Development Company Limited (OGDCL) and Pakistan Petroleum Limited (PPL) struggled to find hydrocarbon reserves in an offshore zone in Arabian Sea in association with US energy giant ExxonMobil and Italian firm Eni. Pakistan has made 17 attempts to make offshore drilling but they did not yield the desired results. "From our perspective, it was always going beyond the immediate trade imperative. The whole point of this is that trade and investment have to go hand-in-hand," the finance minister said after reaching the deal with the US. "The role of the private sector is prominent, because when we were trying to figure out how to reduce or end the trade imbalance, the private sector was the first constituent who came up and said they will help," Aurangzeb said. In the last fiscal year, Pakistan exported $6 billion worth of goods to the US compared to $2.4 billion imports, earning a surplus of $3.7 billion, a source of concern for President Donald Trump.
Express Tribune
19-07-2025
- Business
- Express Tribune
Google granted tax exemption
Sources said tax authorities assured the company that 'Google is not the target of the Digital Presence Proceeds Tax Act' and that the legislation is designed to address only those with significant digital presence but no physical or registered presence in Pakistan. photo: REUTERS Listen to article Pakistan has assured US-based Google that it will be exempt from the newly imposed 5% digital tax, and parts of the company's income will be taxed at even two-thirds reduced rates, further reducing the country's earnings from foreign firms operating locally. The clarification, given by the Federal Board of Revenue (FBR) to the tech giant, has raised questions about the effectiveness of the new tax law, indicating that the government may have not fully considered the implications before enacting the Digital Presence Proceeds Act 2025 last month. The government enacted the Digital Presence Proceeds Act in June to enhance tax collection from offshore companies with significant digital presence that were not paying taxes on their earnings. Sources said tax authorities assured the company that "Google is not the target of the Digital Presence Proceeds Tax Act" and that the legislation is designed to address only those with significant digital presence but no physical or registered presence in Pakistan. This assurance was sent electronically to Kyle Gardner, Google's representative for government affairs in South Asia. Google has a significant business presence in Pakistan and provides services for online advertising, search engines, cloud computing, communication, and entertainment. It is also the single largest contributor of digital service tax payments. In contrast, firms like Meta, Amazon, Microsoft, and Netflix contribute little to the over Rs1 billion in total income tax collected from tech giants, according to FBR officials. The tax authorities assured Google that since it has a branch office in Pakistan, it will not be liable to pay the 5% tax on its income due to its legal status as "a tax resident under relevant tax laws of Pakistan." FBR spokesman Dr Najeeb Memon was not available for comments. The new law states that it will not apply to any payment for digitally ordered goods where such payment is effectively connected with a branch office of the foreign vendor in Pakistan, and the goods are supplied from within Pakistan. It also excludes digitally delivered services received in Pakistan and rendered through a branch office of the foreign vendor. "Since you are operating through a registered branch, your operations fall squarely within this exemption. Similarly, the digital services tax provisions of the income tax law do not apply to tax residents of Pakistan," stated the FBR communication with Google. The enactment of the Digital Presence Proceeds Act had created ripples in Pakistan, particularly among YouTube users. Before the new budget, Google was paying 10% income tax under Section 152 of the Income Tax Ordinance, which the government increased to 15%. However, surprisingly, the government has also shown a path for Google to pay only 5% income tax instead of 15%. Authorities further stated that even if any of Google's operations are conducted from outside Pakistan, the applicable rate under the Digital Services Tax and the Digital Presence Proceeds Act has been reduced to 5% instead of the 15% rate the company had perceived. According to the FBR, if a person is subject to the Digital Presence Proceeds Tax, then tax under Section 152 of the Income Tax Ordinance shall not be deducted on the same transaction. "This safeguards Google against any double taxation. In fact, Google's applicable tax rate has now been reduced from 10% to 5%, given that the Digital Proceeds Act imposes a 5% rate compared to the 15% withholding tax rate under the Income Tax Ordinance," the government assured Google. Going a step further, the government has offered Google full income tax exemption if it shifts its local branch office to a Special Technology Zone (STZ). Under Clause 123EA of the Second Schedule of the Income Tax Ordinance, 2001, profits and gains derived by zone enterprises under the STZ Authority Act are fully exempt from income tax until 2035. The law was intended to tax digitally delivered services provided over the internet or electronic networks, where delivery is automated with minimal or no human involvement. These include services such as music, audio and video streaming, cloud computing, software, telemedicine, e-learning, online banking, architecture, research, consultancy, and digital accounting services.
Express Tribune
18-06-2025
- Business
- Express Tribune
Taxes on hybrid cars, solar panels being withdrawn
Listen to article The National Assembly Standing Committee on Finance on Tuesday unanimously rejected the proposed 18% sales tax on the import of solar panels, while the government also announced the withdrawal of another controversial measure to increase sales tax on hybrid vehicles, reversing both the anti-environment initiatives. The committee in its meeting, chaired by Pakistan Peoples Party's (PPP) National Assembly member (MNA) and former finance minister Syed Naveed Qamar, also raised questions on the proposed new bill, the Digital Presence Proceeds Act 2025 but did not announce its judgment. The rejection of the 18% sales tax on import of solar panels and its parts, as announced by Qamar, is the first such rejection by the committee after it started discussing the Finance Bill. Unlike the Senate, the decisions of the National Assembly or its standing committee are binding in case of the Finance Bill. The government had estimated Rs20 billion in revenues from the 18% sales tax on the import and supply of photovoltaic cells, whether assembled or not. Since the IMF had not endorsed the proposal, the rejection by the committee will not have any adverse implications for the IMF programme. During the committee meeting, Federal Board of Revenue (FBR) Chairman Rashid Langrial argued that sales tax had already been levied on the local assembly of the solar panels; therefore, the rejection of the import stage tax could put the local industry at a disadvantage. However, he could not give firm figures about the share of the local industry in the total sales but said that a very few percentage was supplied locally. "If the government did not accept our rejection, the National Assembly will veto it," Qamar said. Qamar asked the government to find other ways for incentivising the local industry. Finance Minister Muhammad Aurangzeb said that the era of giving subsidies had ended. On that Qamar reminded him that the government had just announced subsidies in the budget for electric vehicles. In the budget, the government had imposed 1% to 3% car engine levy to raise Rs10 billion for funding the electric vehicles. "It is a cross subsidy on electric vehicles", Aurangzeb said. "It is still a subsidy funded by someone else," retorted Qamar. The government has long been trying to discourage the use of solar panels – a source of cheaper electricity – over the government-sold expensive grid-based power. "No political party in the National Assembly has supported the 18% tax and the government will have to withdraw it," Qamar said. The finance minister acknowledged the feedback. Hybrid cars Meanwhile, the government on Tuesday announced the withdrawal of the proposed increase in the sales tax rate from 12.5% to 18% on hybrid cars of up to 1800 cc. This would result in a loss of Rs7 billion potential revenue. The reduced sales tax rate of 12.5% on the hybrid cars would stay, FBR Chairman Langrial stated. Although, he told the committee, the finance minister had announced it in the budget speech, the tax would not be increased. It is the second time in the past one year when the government announced to increase the sales tax rate on hybrid cars but subsequently withdrew it before the approval of the budget by the National Assembly. Under the automobile policy, the government cannot increase the rate till June 2026. However, the FBR chairman refused to withdraw the proposed increase in the sales tax rate for middle income group's up to 850 cc cars. In the budget, the government has proposed to increase the sales tax rate on 850 cc cars from 12.5% to 18%. Langrial said that if a person can buy a Rs3 million small car, he can also pay 18% sales tax. It seems that after the budget small cars will become expensive but the luxurious SUVs will become cheaper, remarked MNA Usama Mela of the Pakistan Tehreek-e-Insaf (PTI). The committee had a heated discussion on the issue of giving policing powers to the FBR and the fear of its abuse by the taxmen. The entire Finance Bill is like declaring martial law on businesses, remarked PPP MNA Nafisa Shah. However, the chairman FBR took an exception to labelling the bill as a piece of martial law work. "The harsh words like martial law have been used but I want to clarify that I work for the democratic government," Langrial said, before opting to leave the meeting hall. The standing committee also showed its discomfort over giving FBR's authority to the local police to trace the non-tax paid cigarettes and confiscate those. The members observed that this would give another window to the police to extract money from the people. "Poor people smoke to relieve stress but the rich can afford diet coke," Sharmila Faruqi remarked. The committee also questioned the government's new bill, the Digital Presence Proceeds Act. The bill has been introduced to charge 5% tax on the value of online payments made to foreign digital companies like Netflix and Amazon. FBR Member Dr Najeeb Memon said that the quantum of foreign payments was much more than Rs300 billion and the government could easily get Rs15 billion in revenues. He said that the credit card payments to firms like Netflix and Amazon stood at Rs300 billion this year. The size of tax-free sales by Temu was also Rs4 billion. The committee members called for bring the bill as a separate law instead of making it part of the Finance Bill.
Express Tribune
18-06-2025
- Business
- Express Tribune
Solar panel, hybrid car tax rejected
An expert said that hybrid vehicles would help Pakistan in reducing oil import bills and save foreign exchange. Photo: File Listen to article A National Assembly panel on Tuesday unanimously rejected the 18% sales tax on solar panel imports, while the government announced it would withdraw another controversial proposal to increase in sales tax on hybrid vehicles, rolling back two controversial budget measures viewed as anti-environment. The National Assembly Standing Committee on Finance also raised questions about the proposed Digital Presence Proceeds Act 2025 but did not issue a final decision. The meeting was chaired by Pakistan People's Party (PPP) MNA and former finance minister Syed Naveed Qamar. "The committee unanimously rejects the 18% sales tax on import of solar panels and its parts," Qamar said after detailed discussion. Unlike the Senate, the National Assembly and its standing committee's decisions are binding in the case of the Finance Bill. This was the committee's first formal rejection since it began reviewing the Finance Bill. The government had projected Rs20 billion in revenue from the 18% sales tax on the import and supply of photovoltaic cells, whether assembled or not. The International Monetary Fund (IMF) had not endorsed the tax, and its rejection by the committee will not affect the IMF programme. FBR Chairman Rashid Langrial said a sales tax already applied to locally assembled solar panels, and exempting imports could hurt the domestic industry. However, he failed to provide reliable data on local production's share in total sales and admitted local supply was minimal. "If the government doesn't accept our rejection, the National Assembly will veto it," said Qamar, urging alternative means to support local producers. Finance Minister Muhammad Aurangzeb said the era of subsidies had ended, to which Qamar responded that the government had just announced subsidies for electric vehicles in the same budget. "It is a cross-subsidy on electric vehicles," said Aurangzeb. "It is still a subsidy funded by someone else," replied Qamar. The budget introduced a 1% to 3% engine levy to raise Rs10 billion for electric vehicle subsidies. The government has long sought to reduce reliance on solar energy, which provides cheaper electricity than costly grid power. "No party in the National Assembly supports the 18% solar tax. The government must withdraw it," Qamar said. The finance minister acknowledged the feedback. Hybrid tax withdrawn The government also announced it would withdraw the proposed increase in sales tax on hybrid cars up to 1800cc, maintaining the current 12.5% rate. The reversal will cost an estimated Rs7 billion in potential revenue. "The 12.5% sales tax on hybrid cars will remain," said the FBR chairman. He said that although the tax hike had been announced in the budget speech, it would not be increased. This marks the second time in a year that the government proposed raising the tax on hybrid vehicles, only to backtrack before the budget's approval by the National Assembly. Under the current auto policy, the tax rate on hybrid cars cannot be increased before June 2026. However, Langrial said the government would proceed with raising the sales tax on small cars up to 850cc, often purchased by middle-income buyers. The government has proposed a sales tax rate increase from 12.5% to 18%. Langrial argued that buyers of Rs3 million cars could afford to pay 18% sales taxes. "It seems small cars will become more expensive while luxury SUVs get cheaper," remarked Pakistan Tehreek-e-Insaf (PTI) MNA Usama Mela. FBR powers spark controversy The committee also held a heated debate over proposals to expand the Federal Board of Revenue's policing powers, warning of potential abuse. "The Finance Bill is like declaring martial law on businesses," said PPP MNA Nafisa Shah. Langrial objected to the comparison. "Harsh words like martial law have been used, but I want to clarify that I work for a democratic government," he said before leaving the meeting room. Committee members also opposed giving police the authority to trace and seize untaxed cigarettes under FBR directives. They warned the measure could open new avenues for bribery. "Poor people smoke to relieve stress, but the rich can afford diet coke," quipped MNA Sharmila Faruqi. Digital tax plan questioned The committee also questioned the Digital Presence Proceeds Act, a new bill aimed at taxing online payments to foreign digital companies like Netflix and Amazon. The bill proposes a 5% tax on the value of such payments. FBR Member Dr Najeeb Memon said annual foreign payments exceeded Rs300 billion, with potential to raise Rs15 billion in tax revenue. He said credit card payments to Netflix and Amazon alone hit Rs300 billion this year, while Chinese e-commerce platform Temu made Rs4 billion in tax-free sales. Committee members urged the government to introduce the digital tax measure as a separate law, not as part of the Finance Bill.
