The issue of tax misreporting has taken center stage in Pakistan’s economic discourse following allegations by PML-N Senator Anusha Rahman that textile exporters are disguising their shipments as IT exports to exploit significantly lower tax rates. The allegations, raised during a meeting of the Senate Standing Committee on Finance, have cast doubt on the recent double-digit growth in the country’s IT exports.
During the session, chaired by Pakistan Peoples Party (PPP) Senator Saleem Mandviwalla, Rahman pointed out that a growing number of textile exporters were taking advantage of the 0.25% income tax rate applicable to IT and technology-based exports. This move, she claimed, allowed them to bypass the 29% income tax imposed on goods exporters under the last federal budget. The senator based her concerns on reports from IT industry stakeholders, coupled with a sharp increase in IT-related company registrations.
FBR Chairman Rashid Langrial acknowledged the plausibility of the alleged tax evasion and assured the committee that an investigation would be launched to verify the claims. He admitted that such practices, if proven, could significantly distort the actual performance of the IT sector and have serious policy implications. Pakistan’s IT exports have surged by 28% in the first half of the fiscal year 2024-25, reaching $1.9 billion. While the sector has celebrated this increase, skepticism has emerged over the authenticity of the reported figures, particularly considering government-imposed internet restrictions that were expected to dampen industry growth.
Further fueling suspicions is data from the Securities and Exchange Commission of Pakistan (SECP), which revealed that 652 new IT and e-commerce companies were registered in January 2025 alone. The sector accounted for nearly 20% of all company incorporations that month, making it the highest-growing category. However, industry insiders have raised red flags over the fact that many of these newly established firms—particularly those registered after June 2024—are reporting higher sales figures than long-standing IT companies.
Stakeholders within the IT industry have expressed concerns that such misreporting could inflate the sector’s performance artificially, potentially prompting the government to withdraw crucial tax incentives meant to support genuine IT exporters. Given that the country is pushing for an increase in its technology exports to reduce reliance on traditional goods exports, the allegations, if substantiated, could derail future policy incentives and shake investor confidence. Beyond the tax fraud allegations, the Senate committee also debated the classification of the Tax Laws Amendment Bill 2024 as a Money Bill, which limits the Senate’s ability to vote on it. Senator Mandviwalla revealed that National Assembly Speaker Sardar Ayaz Sadiq had denied personally declaring the bill a Money Bill, suggesting that the decision was taken directly by the government.
The proposed bill introduces new economic restrictions on property and vehicle purchases, a move that has sparked opposition from lawmakers and real estate stakeholders who fear it could stifle economic growth in the sector. Despite the controversy, the government remains determined to pass the bill ahead of the International Monetary Fund’s (IMF) review mission, scheduled to arrive in Pakistan on March 3. As the debate intensifies, FBR’s forthcoming investigation into alleged tax fraud by textile exporters is expected to provide clarity on whether IT export figures reflect genuine growth or if misreporting is skewing the data. If irregularities are found, the government may be compelled to introduce stricter oversight measures to curb such practices, ensuring transparency in the taxation of both traditional and digital industries.
