IT firms demand major tax reforms
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Pakistan's Information Technology (IT) companies have strongly demanded the government to rationalise taxes on the IT sector in order to enhance its exports manifold in the coming years.
Muhammad Umair Nizam, Senior Vice Chairman of the Pakistan Software Houses Association (P@SHA), called for a major reduction in the burden of income tax on employees' salaries from the current 35% to a flat 5% in order to facilitate IT companies in maintaining their exports growth. This step, he explained, would help IT companies match the competitiveness of remote workers in the IT sector who are paying a minimal tax rate of just 1% as freelancers.
"P@SHA is looking forward to the government granting a 10-year tax holiday to encourage new foreign and domestic investments, the streamlining of foreign exchange regulations, greater facilitation from commercial banks, the removal of anomalies in sales tax, the allocation of dedicated funds for skill development and the acceleration of the operational materialisation of Special Technology Zones (STZs) and IT parks across the country," he said.
He stressed that the government should urgently do away with the heavy 10% tax currently imposed on the transaction of debit cards linked to foreign exchange accounts, as this eats up a huge share of the earnings of IT companies and severely impacts their profitability.
Highlighting the sector's potential, he said that information technology has now become the fastest-growing export industry of Pakistan, and the country is poised to achieve a record $4 billion in its IT exports for the fiscal year 2025, covering the period from July 2024 to June 2025. Nizam also pointed out that Pakistan is rapidly expanding into new sub-sectors and verticals across various spheres of technology, but expressed concern that conventional regulatory frameworks continue to create bottlenecks due to their inability to adapt to the fast-paced evolution of the global tech industry.
"P@SHA's role is to translate the needs and demands of our member companies into policies, incentives, and actions. Whether it's about export taxation, ease of doing business, payroll taxation, international visibility, or digital infrastructure - we take those concerns straight to the power corridors," he added. Mehwish Salman, an award-winning serial entrepreneur and CEO of Datavault Pakistan, stated that the government must allocate a handsome portion of the national budget toward promoting emerging technologies, such as artificial intelligence, cybersecurity, the internet of things, and data engineering, to grow the country's exports and foster greater adaptation of digitisation across various sectors.
In this regard, she said the government should continue its capacity-building programmes by partnering with IT companies to arrange boot camps in various cities, aiming to upskill working professionals and bring them up to par with global standards. Salman also stressed that the government should introduce subsidies for female professionals seeking certifications and specialised training, along with scholarships for female students, in order to encourage and significantly increase their contributions.
"Through effective industry-academic liaison, we need to upgrade our curriculum based on emerging technologies at both private and public sector universities to meet the increasing demand for highly skilled human resources in the country's IT sector," she said.
She further suggested that the applications of AI tools and coding should be introduced to students at the secondary school level, which would promote a culture of research, development, and innovation among the younger generation.
Meanwhile, former Chairman of P@SHA, Muhammad Zohaib Khan, said that IT remains the only industry in Pakistan with an industry trade surplus in the vicinity of 75%, and pointed out that it is the only sector that can grow at an exponential rate, develop a skilled workforce, create employment opportunities rapidly, help curtail the country's growing trade deficit, and keep the current and external accounts healthy.
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