Aitizaz Hassan ISLAMABAD, June 10, (INP-WealthPK): Pakistan is likely to miss the export target of $3.5 billion for the information technology (IT) sector in the current fiscal owing to a shortage of incentives for the industry in the country, WealthPK reports. According to a report of the Pakistan Software House Association (P@SHA), growth in the IT and Information Technology Enabled Services (ITeS) industry has declined in the country during the fiscal year 2021-22. The change in the tax regime has affected the potential growth in the industry, it adds. The report says that 47 percent growth in the IT/ITeS industry was recorded in the previous financial year. Had the growth continued at the same pace, the IT industry would have crossed the volume of $3.5 billion export in the current fiscal, it adds. The report has cited five major reasons for the decline in the IT exports from the country, with a shortage of incentives for the industry and a change in tax regime on top of them. It says that the tax exemption was the only incentive given to the industry. The government had promised to keep it intact till 2025. However, in 2021, it was changed to a controversial tax credit regime. It was a surprise for the industry. The representatives of the industry and relevant ministries were not consulted before making the change last year. The current tax credit regime has not been implemented as per the planned commitment. The banks are deducting one percent tax from the companies, but they have not been awarded tax exemption certificates even after six months. The process includes negotiations with field officers, which leads to further delay. “The current regime discourages IT exports from Pakistan and also raises questions about the consistency and continuity of the policies,” says the report. According to the report, delay in cash rewards and financial incentives is also one of the major reasons for the failure of the industry to achieve the target. The cash rewards were announced as the first-ever monetary incentive for the IT/ITeS industry in 2021, but it has not been enforced so far. “The disbursement under the scheme was calculated according to the growth rate of IT/ITeS export remittances during the financial year 2020-2021,” says the report. It says that the strategy to allocate cash reward incentives on the basis of growth instead of total revenue has discouraged a significant number of companies to apply for the scheme. The report says that growth in the sector was affected by the delay in making Special Technology Zone (STZ) functional. The STZ was approved in August 2020. However, it has not been made functional despite a lapse of two years. The IT industry has also not been given representation in the Special Technology Zone Authority. It says that IT exports were also affected by the delay in the implementation of the prime minister’s package for the industry. In January 2022, a package was approved and announced by the prime minister to increase IT exports in the financial year 2021-22. However, the package has not been implemented so far. The report says that, unlike other industries, the IT sector has long-term contracts with firms and is dependent on political stability in the country.