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Calling out Freelancers: Government registering them for controlling Money Laundering

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Calling out Freelancers: Government registering them for controlling Money Laundering

The government has told the Senate Information and Telecommunications Committee that it has made up its mind to register freelancers in the country. Following the serious threat of money laundering. 

In a recent meeting of the Senate Information and Telecommunications Committee, which was led by Senator Kahuda Babar. Officials from the Department of Information Technology and Telecommunications notified the committee that the Federal Board of Revenue (FBR) and the State Bank of Pakistan (SBP), were worried that unregistered freelancers could be a potential source of money laundering.

Committee members expressed serious concerns about the registration of freelancers. Concerned members believed that, the government was creating obstacles for freelancers rather than facilitating them in return.

However, Senator Afnanullah Khan said that the Financial Action Task Force (FATF) has also made reservations related to international payments to freelancers. He further added that it was possible to fund terrorism through unregistered freelancers. The senator recommended the inclusion of the financial technology industry, for a secured and documented transfer of payments. 

Syed Junaid Imam, member Information Technology, Ministry of Information Technology and Telecommunications. In the meeting, he notified that the Ministry of Commerce has formulated a Policy for Registration and Facilitation of Payment Gateways in Pakistan. 

Imam told the committee that there were several issues regarding the entry of PayPal and other payment gateways into the Pakistani market. He further stated that a committee has been formed within the Finance Division to look into the issues of registration of international payment gateways. The committee was mandated to facilitate international and local payment gateways.

In this regard, the Ministry of Commerce has developed a Gateway Registration and Facilitation Policy. The ministry will present the policy to the Ministry of Finance next week. The policy will be presented to the Federal Cabinet after review by the Department of Finance. He said he hoped the federal government would approve the policy within a month.

The government is making such decisions to eliminate money laundering, but freelancers are not on the same page. Majority of the freelancers in the country are students, some work part-time, and some have this sole source of income.

On an average, they don’t earn enough, so if they are taxed, it will further reduce their income. They complain that the government does not allow them to survive and that many deductions were made before they received their final payment. It seems like an extra burden to them.

How things could be opposite for them?

IT enabled export services are subject to 100% tax credit in Pakistan, and therefore, IT service providers are not liable to any taxes if they register as such and bring at least 80% of these export proceeds into Pakistan through normal banking channel subject to meeting following conditions:

  • They have filed the income tax return for the last tax year
  • Any tax required to be deducted or collected by them (as service providers) has been deducted or collected and paid to the Govt. treasury. In other words, they have discharged their duty as a withholding agent, if any.
  • They have filed with FBR the withholding tax statements for the immediately preceding tax year.
  • They have filed the sales tax returns (as service providers) for the tax periods corresponding to the relevant tax year. Therefore, registration with applicable provincial sales tax authority based on the principal place of business will also be required besides ongoing monthly sales tax filing under the provincial laws.

Sources: propakistani.pk

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