Budget to spell doom for Pakistan's IT industry: P@SHA

Business Recorder

a day ago

KARACHI: Outrightly rejecting the budget 2025-26, IT industry said budget has fatally ignored Pakistan's IT and IT-enabled Services (ITeS) sector, terming disappointment and grave threat to the sector.
In a statement, Pakistan Software Houses Association (P@SHA) said budget is decisive blow to an industry that has carried the hopes of export-led recovery; youth employment and digital transformation.
It said an industry that today employs over 600,000 young Pakistanis—one of the country's largest and most vital pools of skilled talent.
Yet in a stunning act of neglect, the budget fails to address two urgent and long-standing demands from the sector: first, a defined and fair taxation framework for remote workers; and second, the continuation—and expansion—of the current tax regime for formal IT exporters.
What the industry has consistently asked for is not a one-time concession or patchwork relief, but a stable, 10-year tax policy framework—one that allows companies to invest, grow and compete with global peers. That has been ignored.
For over a year, the Pakistan Software Houses Association (P@SHA) has warned of a growing imbalance. High-earning remote workers employed by foreign companies; often indistinguishable from full-time employees, remain largely untaxed.
Meanwhile, P@sha said, companies based in Pakistan, employing and training local talent, are taxed, audited and over-regulated. This makes local hiring more expensive; while incentivizing capital flight and informal arrangements.
Talent retention is collapsing; export dollars are being parked abroad, and formal firms are bleeding value.
The government's refusal to act is particularly frustrating given the simplicity of the proposed solution: P@SHA has recommended classifying any individual earning over PKR 2.5 million annually from fewer than three foreign sources as a remote worker.
This affects only the top 5% of earners and avoids harming freelancers and small remitters.
The State Bank already tracks the necessary data. This is a policy that could be implemented overnight—yet has been ignored for years.
Worse still is the government's failure to extend the existing tax regime for exporters.
This regime was the foundation for over $700 million in investment commitments secured through the Digital Foreign Direct Investment (DFDI) initiative. The country spent hundreds of millions of rupees to secure this investment.
Sadly, with no continuity in tax policy and those investments are now in jeopardy. Foreign investors will not engage with a country where rules shift every year.
This is not just bad policy—it is a signal to the world that Pakistan's digital economy is not ready to be taken seriously.
The results will be devastating. Pakistan's IT sector—its fastest-growing, most globally competitive industry—may lose its momentum entirely.
Export growth will stall; jobs will disappear and the government's dream of reaching $25 billion in IT exports will not just be delayed—it will become permanently out of reach.
Copyright Business Recorder, 2025