Hassan Khan
According to the Pakistan Software Houses Association (P@SHA), the federal government’s Budget 2025–2026 will be remembered for its deadly disregard rather than its promises.
This budget is a threat to Pakistan’s IT and IT-enabled Services (ITeS) industry, not just a letdown.
A subtle but devastating blow to a sector that has been bolstered by optimism for digital revolution, youth employment, and an export-led resurgence.
One of the biggest and most important sources of qualified talent in Pakistan is an industry that currently employs over 600,000 young people.
However, in a startling display of indifference, the budget ignores two pressing and long-standing requests from the industry: first, a clear and equitable taxation structure for remote workers; and second, the maintenance and extension of the current tax structure for official IT exporters.
The sector has repeatedly called for a solid, ten-year tax policy framework that enables businesses to develop, expand, and compete with their international counterparts, rather than a one-time concession or patchwork relief. That inquiry has been disregarded.
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The Pakistan Software Houses Association (P@SHA) has been warning about an increasing imbalance for more than a year. The majority of high-paying remote workers who work for foreign corporations and are frequently indistinguishable from full-time employees are not subject to taxes.
In the meantime, Pakistani-based businesses that hire and develop local talent face taxes, audits, and excessive regulations. This encourages capital flight and unofficial agreements while raising the cost of hiring locals.
Formal enterprises are losing value, export dollars are being parked overseas, and talent retention is plummeting.
Considering how easy the suggested remedy is, the government’s inaction is especially annoying: According to P@SHA, anyone who makes more than Rs. 2.5 million a year from less than three overseas sources should be considered a remote worker.
This keeps freelancers and small remitters safe and only impacts the top five percent of earners.
According to P@SHA, the State Bank already keeps track of the relevant information. Although this regulation might be put into effect right now, it has been disregarded for years. The government’s refusal to extend the current tax structure for exporters is even worse.
More than $700 million in investdoiment commitments obtained through the Digital Foreign Direct Investment (DFDI) program were made possible thanks to this regime. This investment cost the nation hundreds of millions of rupees.
Regretfully, those investments are now at risk due to the lack of continuity in tax policy. A nation where the regulations change annually will not attract foreign investment.
In addition to being poor policy, this sends a message to the rest of the world that Pakistan’s digital economy is not yet ready for serious consideration.
The outcomes will be disastrous. The fastest-growing and most competitive industry in Pakistan, the IT sector, might completely falter.
Jobs will be lost, export growth will stagnate, and the government’s goal of $25 billion in IT exports will not only be postponed but will be forever unattainable. The existence of the formal tech ecosystem is directly threatened by Budget 2025 in its existing shape. It incentivizes informality, discourages investment, and penalizes conformity.
The government needs to take swift, decisive action before irreparable harm is done.
Incentives are no longer relevant here. The goal is to protect one of Pakistan’s few viable economic success stories. P@SHA went on to say that the stakes could not be higher.
