Pakistan’s information technology sector is facing the prospect of a 300 percent increase in its tax burden under the upcoming federal budget, with top sources indicating the government is considering raising the tax rate on information technology companies from the current 0.25 percent to 1 percent, a move that has drawn immediate concern from industry associations at a time when the sector is recording some of its strongest export growth figures.
The potential increase comes against a backdrop of sustained momentum in Pakistan’s digital economy. According to the Pakistan Economic Survey 2025-26, information and communication technology export remittances rose nearly 20 percent year-on-year to $3.388 billion during the July to March period of fiscal year 2025-26, compared to $2.829 billion in the same period the previous year. The freelance segment has been even more dynamic, with freelancer remittances surging 51 percent year-on-year to $856.3 million, reflecting both the expansion of Pakistan’s independent digital workforce and its growing share of global outsourcing activity. The proposed tax revision would apply to this entire ecosystem at a moment when the sector’s contribution to foreign exchange earnings is at a record high and when international competitiveness remains critically tied to the affordability of operating as a registered information technology business in Pakistan.
The Pakistan Freelancers Association had urged the government just days earlier to maintain supportive tax policies for freelancers and the broader digital economy in its budget proposals for 2026-27. In its submission, the association called on the Federal Board of Revenue and the Ministry of Finance to retain the existing 0.25 percent tax rate on foreign exchange earnings for at least the next decade, arguing that stability in the tax regime is essential for sustaining export growth, attracting investment, and expanding Pakistan’s footprint in global digital markets. The association also recommended establishing freelancing hubs across major cities, providing subsidies for internationally recognised certifications, and launching skill development initiatives as complementary measures to support the workforce rather than burden it with higher costs. The government has not yet confirmed its final position on the proposed increase, with a definitive announcement expected in the budget presentation scheduled for today.
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