Pakistan Software Houses Association (P@SHA) has submitted a strong appeal to the federal government, calling for consistent policy direction and tax clarity for the IT and IT-enabled Services (ITeS) sector in the upcoming Federal Budget 2025–26. As a key stakeholder in Pakistan’s digital economy, P@SHA emphasized that ensuring a stable fiscal and regulatory environment is critical for the continued growth of the country’s thriving IT industry.
In its formal budget recommendations for FY26, P@SHA highlighted that despite economic challenges, Pakistan’s IT sector remained resilient, contributing $3.2 billion in exports during FY24. The industry is expected to end the fiscal year with nearly $4 billion in export revenue and is on track to reach a $15 billion export target by 2030. However, this upward trajectory, according to the association, is at risk due to persistent issues around inconsistent policy-making, ad hoc taxation, and unresolved operational hurdles.
Recognizing Pakistan’s current obligations under the IMF program, P@SHA affirmed its position as a responsible economic player. The organization clarified that it is not seeking exemptions that may violate international commitments. Instead, it urged the government to implement practical, equitable, and stable policy measures that would empower the IT sector to contribute even more significantly to national economic growth.
One of the major recommendations from P@SHA focuses on resolving tax disparities between employees of registered IT firms and independent remote workers. The association proposed that remote workers be formally defined under the Income Tax Ordinance (2001), especially those earning over Rs. 2.5 million annually through foreign remittances or those working with fewer than three international clients. The suggested classification would apply salaried-like tax treatment to such individuals, leveling the competitive field and discouraging regulatory arbitrage. According to P@SHA, this move would also help widen the tax base without stifling growth.
Policy continuity, particularly in the realm of taxation, was another urgent issue raised by P@SHA. The association argued that unpredictable shifts in tax laws—ranging from export incentives to withholding taxes—make it difficult for firms to plan and scale operations. It warned that such unpredictability could reverse the hard-earned progress achieved by stakeholders, including the Ministry of IT & Telecom (MOITT), PSEB, SIFC, and TDAP. As an example, P@SHA pointed to the recent Digital Foreign Direct Investment (DFDI) initiative, which generated investment commitments exceeding $700 million, of which $600 million were facilitated directly through P@SHA’s efforts.
P@SHA also stressed the importance of operational ease, calling for immediate digitization of international capital repatriation processes. The organization criticized the ongoing harassment of IT firms by various regulatory bodies such as EOBI and tax departments, which it said creates a hostile business climate. These pressures, according to P@SHA, threaten to push more businesses offshore.
The association proposed legal reforms to protect IT companies from outdated labor laws and emphasized that call centers and BPOs—already operating on thin margins—must be shielded from unnecessary disruptions. In the interim, it recommended temporary exemptions from EOBI and other burdensome labor regulations.
Despite being one of the region’s lowest revenue-per-employee tech sectors, Pakistan’s IT industry employs over 600,000 people in the formal economy and continues to expand. However, P@SHA cautioned that this resilience has its limits. Without timely policy reforms, fiscal clarity, and stable regulation, Pakistan risks ceding its digital advantage to more agile regional competitors.
By incorporating P@SHA’s recommendations into the upcoming federal budget, the government has an opportunity to reinforce the sector’s growth, drive exports, and ensure Pakistan remains competitive in the global digital economy.
