Proposed 5% Tax on Digital Services in Upcoming Budget Raises Concerns in Pakistan’s Tech Sector
The Pakistani government is considering a 5% tax on digital services in the upcoming FY2025–26 budget. This proposal aims to broaden the tax base by including digital platforms, both domestic and foreign, in the tax net. The Federal Board of Revenue (FBR) estimates that this measure could generate up to Rs10 billion in revenue.
The proposed tax would apply to a wide range of digital services, including mobile wallets like JazzCash and Easypaisa, online gaming platforms, internet services, streaming services such as Netflix, ride-hailing apps like Careem and Uber, e-commerce platforms like Daraz, cloud storage services, online education portals, and digital advertising platforms.
Industry stakeholders have expressed concerns that this tax could hinder the growth of Pakistan’s digital economy. The Pakistan Software Houses Association (P@SHA) warns that the additional financial burden may slow investment, push freelancers to informal channels, and reduce the country’s competitiveness in the global digital market.
The International Monetary Fund (IMF) has supported the proposed digital services tax, viewing it as a means to increase revenue. However, the IMF has rejected other tax proposals, such as those on movable assets and specific industries, indicating a selective approach to tax reforms.
As the budget awaits parliamentary approval, the tech community is urging the government to reconsider the proposed tax to avoid impeding the country’s digital transformation and economic growth.
Also read:
P@SHA Urges Government for Policy Stability and Tax Clarity in Budget 2025–26
