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Express Tribune
4 days ago
- Business
- Express Tribune
P@SHA Chairman urges government not to introduce any new taxes for IT
The Pakistan Software Houses Association (P@SHA) has called on the federal government to not introduce any new taxation and a business-friendly package for the country's information technology sector in the upcoming fiscal budget, set to be presented on June 10. In a statement to the media, P@SHA Chairman Sajjad Mustafa Syed disclosed that of the $700 million invested in Pakistan's IT industry, $600 million originates from companies affiliated with the association. He emphasised the sector's dependence on stability, consistent policies, and supportive incentives to ensure continued growth. 'We are urging the government to implement a fixed tax regime for the next ten years, from 2025 to 2035, and to commit to this in the FY26 budget,' said Syed. Syed also advocated for the continuation of the 0.25 percent withholding tax rate for companies registered with the Pakistan Software Export Board (PSEB) beyond 2026 under the proposed fixed tax system. Highlighting a disparity in tax rates within the sector, he pointed out that remote IT freelancers face a tax rate of only 1 percent, while salaried employees may pay up to 35 percent in income tax. Syed called on the government to harmonise tax treatment across employment categories in the industry. He also underscored the need to ease the transfer of foreign currency revenues, warning that inconsistent policies may hinder foreign direct investment in Pakistan's tech ecosystem. 'Without decisive, pro-business reforms, nearly 600,000 jobs in the IT sector could be jeopardised,' he cautioned.
Business Recorder
23-05-2025
- Business
- Business Recorder
Bridging policy gaps in IT sector
EDITORIAL: The increasingly pivotal role that the country's IT sector plays in driving national development — by creating jobs, generating vital tax revenue, boosting exports, and attracting both domestic and foreign investment — positions it as a potentially transformative engine of inclusive and sustained economic growth. Even amid the economic turmoil of recent years, the sector has remained a resilient performer, and is set to contribute close to USD4 billion in exports by the close of the current fiscal year. By 2030, this figure is expected to surge to USD15 billion. Despite this promising outlook, numerous facets of the government's approach to the IT sector continue to impede its growth, and prevent it from realising its true potential. In a recent press briefing, the chairman of the Pakistan Software Houses Association (P@SHA) outlined key hurdles facing the IT sector, including policy unpredictability, ad hoc taxation measures and operational bottlenecks. He emphasised how these issues undermine investor confidence and constrain the sector's economic contributions. At the heart of these difficulties lie the frequent changes in tax regulations, ranging from export incentives to withholding taxes and other fiscal measures, which discourage long-term investment. Sudden and arbitrary changes to the tax framework weaken investor confidence, jeopardising years of effort by Pakistani software houses and IT companies to build global credibility, nurture talent and develop robust digital infrastructure. Pakistan currently imposes one of the highest corporate tax rates in the region at 29 percent, compounded further by elevated auxiliary taxes and high input costs. In contrast, the UAE maintains a rate as low as nine percent, while Vietnam's stands at 25 percent. Vietnam's streamlined government policies and predictable tax environment, in fact, have helped its annual exports surge to a highly impressive USD141 billion, underscoring the vast potential Pakistan could also unlock in export earnings if its IT sector were supported by a more enabling and competitive tax regime. Persistently high tax rates risk pushing IT firms to more favourable jurisdictions, weakening local industry and forfeiting future gains. While our chronic struggle with low tax revenues is well-documented, uncompetitive tax structures will not resolve the issue, and are more likely to deter investment, drive capital outflow and ultimately worsen the revenue shortfall they aim to address. Another critical issue is the misalignment in tax treatment between employees of IT firms operating domestically and independent remote workers employed by foreign companies. As P@SHA has noted, despite the rapid growth of remote work in recent years, remote workers remain undefined under the Income Tax Ordinance, 2001. This legislative gap has led to a significant disparity: while IT companies must withhold an additional 30 percent income tax from employees earning over Rs2.5 million annually, remote workers earning similar incomes are not subject to the same tax burden. This imbalance puts local firms at a competitive disadvantage, making it harder for them to attract and retain top talent, as skilled professionals prefer opportunities with foreign employers offering higher take-home pay. This also discourages international companies from establishing a physical presence in Pakistan, as they can access the same talent pool remotely without dealing with the associated tax implications. Rectifying this disparity is essential to creating a level playing field and fostering a policy environment that supports both local industry growth and foreign investment. Pakistan stands at the cusp of a vital transformation in its IT sector, where it could emerge as a truly competitive player in the global digital economy. But this opportunity could slip away if the regulatory environment remains riddled with unclear tax rules, inconsistent incentives and constraints on digital freedoms. The authorities must pivot towards a more forward-looking, coherent and enabling policy framework that empowers innovation, protects digital rights, and attracts both talent and investment. Copyright Business Recorder, 2025
Business Recorder
21-05-2025
- Business
- Business Recorder
Pakistan's IT, ITeS sector: P@SHA underscores need for consistent tax policy
ISLAMABAD: The Pakistan Software Houses Association (P@SHA) has strongly recommended a consistent tax policy with no changes in the tax structure of IT and IT-enabled Services (ITeS) sector in the Federal Budget 2025-26. Addressing at a press conference here on Tuesday, Sajjad Mustafa Syed, Chairman P@SHA stated that the government must ensure policy stability and tax clarity for the IT and IT-enabled Services (ITeS) sector in 2025–26. As a cornerstone of Pakistan's digital economy, the IT industry has demonstrated resilience amid economic turbulence, contributing USD 3.2 billion in exports in 2023–24, and is projected to close the current fiscal year at nearly USD 4 billion. Forecasts estimate a USD 15 billion export potential by 2030. Despite these promising numbers, policy inconsistency, ad hoc taxation, and operational challenges continue to undermine investor confidence and economic contributions, he regretted. Policy stability is essential for sustaining the momentum we've recently achieved. The recent DFDI event alone resulted in over USD 700 million in investment commitments — of which USD 600 million was facilitated by P@SHA, he said. Frequent changes in tax laws — whether related to export incentives, withholding taxes, or other fiscal instruments — discourage long-term investment. The lack of predictability threatens to undo the combined efforts of public and private sector stakeholders, including MOITT, PSEB, SIFC, and TDAP. If investor confidence is shaken, Pakistan risks forfeiting years of progress, including advances in branding, skill development, and digital infrastructure, he added. 'We are not asking for exemptions that jeopardize international obligations. However, if our practical, fair recommendations are implemented in both letter and spirit, Pakistan's IT sector can contribute substantially more to national growth,' Sajjad said. He recommended there is a critical need to align tax treatment between employees of IT firms and independent remote workers. The P@SHA urged the government to formally define remote workers in the Income Tax Ordinance (2001). The proposed classification applies to individuals earning over Rs 2.5 million annually through foreign remittances or working with fewer than three international clients, taxing them similarly to salaried individuals. This recommendation aims to expand the tax base while leveling the playing field. The current disparity creates an uneven labor market where it's more cost-effective for global companies to hire Pakistani talent directly rather than through local firms. As a result, local IT businesses lose both competitiveness and valuable export revenue. A clear and fair framework will bring transparency for taxpayers and authorities alike and help protect Pakistan's economic interests. IT firms, especially call centres and BPOs, operate on narrow margins, have service level agreements and cannot afford such disruptions. Legislation must be enacted to shield them from outdated and misaligned labor regulations. Until reforms are complete, temporary exemptions must be provided to IT companies from EOBI and other arcane labor laws. Despite being one of the region's lowest revenue-per-employee markets, Pakistan's IT sector employs a massive formal workforce of over 600,000. The sector's resilience is remarkable, bearing some of the highest input costs, yet continuing to grow. Copyright Business Recorder, 2025
Business Recorder
21-05-2025
- Business
- Business Recorder
IT, ITeS sector: P@SHA underscores need for consistent tax policy
ISLAMABAD: The Pakistan Software Houses Association (P@SHA) has strongly recommended a consistent tax policy with no changes in the tax structure of IT and IT-enabled Services (ITeS) sector in the Federal Budget 2025-26. Addressing at a press conference here on Tuesday, Sajjad Mustafa Syed, Chairman P@SHA stated that the government must ensure policy stability and tax clarity for the IT and IT-enabled Services (ITeS) sector in 2025–26. As a cornerstone of Pakistan's digital economy, the IT industry has demonstrated resilience amid economic turbulence, contributing USD 3.2 billion in exports in 2023–24, and is projected to close the current fiscal year at nearly USD 4 billion. Forecasts estimate a USD 15 billion export potential by 2030. Despite these promising numbers, policy inconsistency, ad hoc taxation, and operational challenges continue to undermine investor confidence and economic contributions, he regretted. Policy stability is essential for sustaining the momentum we've recently achieved. The recent DFDI event alone resulted in over USD 700 million in investment commitments — of which USD 600 million was facilitated by P@SHA, he said. Frequent changes in tax laws — whether related to export incentives, withholding taxes, or other fiscal instruments — discourage long-term investment. The lack of predictability threatens to undo the combined efforts of public and private sector stakeholders, including MOITT, PSEB, SIFC, and TDAP. If investor confidence is shaken, Pakistan risks forfeiting years of progress, including advances in branding, skill development, and digital infrastructure, he added. 'We are not asking for exemptions that jeopardize international obligations. However, if our practical, fair recommendations are implemented in both letter and spirit, Pakistan's IT sector can contribute substantially more to national growth,' Sajjad said. He recommended there is a critical need to align tax treatment between employees of IT firms and independent remote workers. The P@SHA urged the government to formally define remote workers in the Income Tax Ordinance (2001). The proposed classification applies to individuals earning over Rs 2.5 million annually through foreign remittances or working with fewer than three international clients, taxing them similarly to salaried individuals. This recommendation aims to expand the tax base while leveling the playing field. The current disparity creates an uneven labor market where it's more cost-effective for global companies to hire Pakistani talent directly rather than through local firms. As a result, local IT businesses lose both competitiveness and valuable export revenue. A clear and fair framework will bring transparency for taxpayers and authorities alike and help protect Pakistan's economic interests. IT firms, especially call centres and BPOs, operate on narrow margins, have service level agreements and cannot afford such disruptions. Legislation must be enacted to shield them from outdated and misaligned labor regulations. Until reforms are complete, temporary exemptions must be provided to IT companies from EOBI and other arcane labor laws. Despite being one of the region's lowest revenue-per-employee markets, Pakistan's IT sector employs a massive formal workforce of over 600,000. The sector's resilience is remarkable, bearing some of the highest input costs, yet continuing to grow. Copyright Business Recorder, 2025
Express Tribune
21-05-2025
- Business
- Express Tribune
IT reforms sought to halt exodus
P@SHA has said that the govt will have to decide the future course – either develop the country as a digital powerhouse or remain confined as skilled individuals leave the country. photo: file Listen to article The information technology (IT) sector has warned the government that companies will shift to other countries if favourable policies are not introduced and changes are made in the existing tax regime. Addressing a news briefing on Tuesday, Pakistan Software Houses Association (P@SHA) Chairman Sajjad Syed said that investments were not brought into the country by the government in public sector industries. "Investments are invited by the private sector and the government functionaries have to be facilitators; this includes branding, infrastructure development, skill development as well as the tax and fiscal regime," he said. Syed pointed out that currently Pakistan had one of the highest tax rates and negligible certainty about the consistency of policies. He said corporate income tax was 29% in Pakistan, whereas it was as low as 9% in the United Arab Emirates (UAE) and 25% in Vietnam, which had annual IT exports of $141 billion. Other taxes and input costs were also high in Pakistan. Syed added that the IT industry had demonstrated resilience in the face of economic turbulence, contributing $3.2 billion in exports in financial year 2023-24 and it was projected to close the current fiscal year at nearly $4 billion. "An estimated $15 billion export potential is projected by 2030, but more promising numbers can be achieved if there is policy consistency, a long-term taxation regime and operational facilitation by the government to boost investor confidence," the P@SHA chairman remarked. Among the issues highlighted by the association were the need to align tax treatment between the employees of local IT firms and the independent remote workers employed by foreign companies. P@SHA asked the government to formally define remote workers in the Income Tax Ordinance 2001 as the lacuna was forcing IT companies to collect an additional 30% income tax from employees earning over Rs2.5 million annually, whereas those working for international clients did not have to pay high taxes. "This high income tax on local companies has encouraged international competitors to hire the same human resources in Pakistan at higher wages and even save some amount by paying a low income tax," Syed added. P@SHA also demanded that the government ensure continuity in tax policy and added that the IT sector in Pakistan was still in its formative growth stage. He added that policy stability was essential for sustaining the momentum and referred to a Digital Foreign Direct Investment (DFDI) event, where over $700 million worth of investment commitments were made, of which $600 million was facilitated by P@SHA. "If the tax regime is changed in the upcoming budget, there will only be two choices: either the clients leave Pakistani companies as the cost of business will increase or we shift to any conducive market like the UAE, Vietnam or the Philippines," Syed said. P@SHA has said that Pakistan's IT sector employs over 600,000 skilled human resources, but the government has to decide the future course – either develop the country as a digital powerhouse by promoting artificial intelligence or remain confined at the secondary level as high-end skilled individuals will leave the country to seek jobs abroad.
