According to the Pakistan Software Houses Association (P@SHA), the federal government’s Budget 2025 will be remembered for its deadly disregard rather than its promises.
This budget is a threat to Pakistan’s IT and IT-enabled Services (ITeS) industry, not just a letdown.
A subtle but devastating blow to a sector that has been bolstered by optimism for digital revolution, youth employment, and an export-led resurgence.
Over 600,000 young Pakistanis are currently employed in this sector, making it one of the biggest and most important sources of highly qualified talent in the nation.
Nevertheless, the budget ignores two pressing and long-standing requests from the industry, in a striking demonstration of indifference. The first one is a clear and equitable taxation structure for remote workers; and second one is the maintenance—and extension—of the current tax structure for official IT exporters.
Time after time, the business community has asked for a solid, ten-year tax policy framework that authorize businesses to create, increase, and engage with their international counterparts, in place of a one-time concession or patchwork relief. That inquiry has been disregarded.
P@SHA has been giving warnings about an increasing imbalance for over a year. The majority of high-paying remote workers who work for foreign corporations and are frequently indistinguishable from full-time employees are not subject to taxes.
In the meantime, Pakistani-based businesses that hire and develop local talent face taxes, audits, and excessive regulations. This encourages capital flight and unofficial agreements while increasing hiring the cost of locals.
Formal enterprises are losing value, export dollars are being parked overseas, and talent retention is plummeting.
By taking in account how easy the suggested remedy is, the inaction of government is especially annoying: According to P@SHA, anyone who makes more than Rs. 2.5 million in a year from less than three overseas sources should be considered a remote worker.
With this, solely the top five percent of earners are impacted in order to keep freelancers and small remitters safe.
According to P@SHA, the State Bank already keeps track of the relevant information. Although this regulation might be put into effect right now, it has been disregarded for years. The government’s refusal to extend the current tax structure for exporters is even worse.
More than $700 million in investment commitments obtained through the Digital Foreign Direct Investment (DFDI) program were made possible thanks to this regime. This investment will cost the nation hundreds of millions of rupees.
Unfortunately, those investments are now in danger because of the shortage of continuity in tax policy. A nation where the regulations change every year will not be able attract foreign investment.
Not only is this poor strategy, but it also sends a message to the rest of the world that Pakistan’s digital economy is not yet ready for serious consideration.
The outcomes will be disastrous. The fastest-growing and most competitive industry in Pakistan, the IT sector, might completely falter.
Jobs will be lost, export growth will stagnate, and the government’s goal of $25 billion in IT exports will not only be postponed but will be forever unattainable.
According to P@SHA, the existence of the formal tech ecosystem is directly threatened by Budget 2025 in its existing shape. It encourages informality, discourages investment, and penalizes acceptance.
It is important that the government takes quick and definitive measures before it causes damages that are severe in nature.
Incentives here are no longer important. The key is to protect one of Pakistan’s few viable economic success stories. P@SHA continued by adding that the stakes could not be higher.
Loading ...
