Budget 2025 Sounds Alarm Bells for Pakistan’s IT Sector: P@SHA
The Pakistan Software Houses Association (P@SHA) has stated that the federal government’s Budget 2025-26 may be remembered not for what it promised, but for what it dangerously ignored. For Pakistan’s IT and IT-enabled Services (ITeS) sector, this budget is not just a disappointment; it is a serious threat.
It delivers a quiet but decisive blow to an industry that has carried the hopes of export-led recovery, youth employment, and digital transformation. This sector currently employs over 600,000 young Pakistanis, forming one of the country’s largest and most vital skilled talent pools. Yet, in a stunning act of neglect, the budget fails to address two urgent and long-standing demands: a defined and fair taxation framework for remote workers and the continuation and expansion of the current tax regime for formal IT exporters.
The industry has consistently asked not for temporary relief, but for a stable, long-term 10-year tax policy that would allow companies to invest, scale, and compete with global peers. That request has been ignored.
For over a year, P@SHA has warned of a growing imbalance. High-earning remote workers, employed by foreign companies and often indistinguishable from full-time staff, remain largely untaxed. Meanwhile, domestic companies that hire and train local talent are taxed, audited, and over-regulated. This disparity makes local hiring more expensive, discourages investment, and promotes informal work arrangements.
Talent retention is collapsing, export dollars are being parked abroad, and compliant firms are bleeding value. P@SHA’s proposal to classify individuals earning over PKR 2.5 million annually from fewer than three foreign sources as remote workers would address this issue. It targets only the top 5 percent of earners, without affecting freelancers or small remitters. The State Bank already has the data to implement this policy immediately, yet it remains ignored.
Even more damaging is the failure to extend the tax incentives for IT exporters. This regime was the foundation for over $700 million in Digital Foreign Direct Investment (DFDI) commitments. These investments, secured after significant national effort and cost, are now at risk due to policy uncertainty. No investor will engage in a country where rules shift unpredictably.
This is not just poor governance; it sends a clear message to the world that Pakistan’s digital economy lacks credibility.
The consequences could be severe. Pakistan’s fastest-growing and most globally competitive industry could lose its momentum. Export growth may stall, jobs could disappear, and the government’s dream of reaching $25 billion in IT exports may become permanently unattainable.
In its current form, Budget 2025 poses a direct threat to the formal tech ecosystem. It penalizes compliance, discourages formal investment, and promotes informality.
The government must respond, and fast. This is no longer about incentives; it is about protecting one of Pakistan’s only successful economic stories. The stakes have never been higher.
Also read:
P@SHA Urges Government for Policy Stability and Tax Clarity in Budget 2025–26
