Pakistan Software Houses Association (P@SHA) has maintained that the federal government’s Budget 2025-26 may be remembered not for what it promised, but for what it fatally ignored.
For Pakistan’s IT and IT-enabled Services (ITeS) sector, this budget is not just a disappointment; it is a threat.
A quiet but decisive blow to an industry that has carried the hopes of export-led recovery, youth employment, and digital transformation.
An industry that today employs over 600,000 young Pakistanis—one of the country’s largest and most vital pools of skilled talent.
Yet in a stunning act of neglect, the budget fails to address two urgent and long-standing demands from the sector: first, a defined and fair taxation framework for remote workers; and second, the continuation—and expansion—of the current tax regime for formal IT exporters.
What the industry has consistently asked for is not a one-time concession or patchwork relief, but a stable, 10-year tax policy framework—one that allows companies to invest, grow, and compete with global peers. That question has been ignored.
For over a year, the Pakistan Software Houses Association (P@SHA) has warned of a growing imbalance. High-earning remote workers employed by foreign companies, often indistinguishable from full-time employees, remain largely untaxed.
Meanwhile, companies based in Pakistan, employing and training local talent, are taxed, audited, and over-regulated. This makes local hiring more expensive, while incentivizing capital flight and informal arrangements.
Talent retention is collapsing; export dollars are being parked abroad, and formal firms are bleeding value.
The government’s refusal to act is particularly frustrating given the simplicity of the proposed solution: P@SHA has recommended classifying any individual earning over Rs. 2.5 million annually from fewer than three foreign sources as a remote worker.
This affects only the top 5 percennt of earners and avoids harming freelancers and small remitters.
P@SHA said the State Bank already tracks the necessary data. This is a policy that could be implemented overnight—yet has been ignored for years. Worse still is the government’s failure to extend the existing tax regime for exporters.
This regime was the foundation for over $700 million in investment commitments secured through the Digital Foreign Direct Investment (DFDI) initiative. The country spent hundreds of millions of rupees to secure this investment.
Sadly, with no continuity in tax policy and those investments are now in jeopardy. Foreign investors will not engage with a country where the rules shift every year.
This is not just bad policy—it is a signal to the world that Pakistan’s digital economy is not ready to be taken seriously.
The results will be devastating. Pakistan’s IT sector—its fastest-growing, most globally competitive industry—may lose its momentum entirely.
Export growth will stall; jobs will disappear, and the government’s dream of reaching $25 billion in IT exports will not just be delayed—it will become permanently out of reach.
Budget 2025, in its current form, is a direct threat to the survival of the formal tech ecosystem. It penalizes compliance, discourages investment, and incentivizes informality.
The government must act quickly and decisively before irreparable damage is done.
This is not about incentives anymore. It is about preserving one of Pakistan’s only working economic success stories. The stakes could not be higher, P@SHA added.
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I respectfully disagree with PASHA’s stance, as it appears disconnected from the ground realities. Freelancers and remote workers earning over 2.5 million PKR annually often incur significant expenses to sustain their work—without job security, benefits, or any form of government support. Importantly, they contribute to the economy by bringing in valuable remittances.
In my view, these individuals should be exempt from taxation as previously promised. Imposing such a tax could be counterproductive, as many freelancers are already aware of legal methods to safeguard their income abroad. Rather than encouraging transparency, PASHA’s position risks unintentionally promoting the use of informal channels to repatriate funds, making it harder to track and regulate remittances.
Nobody gets anything in return. Salaried class is giving 530billion in taxes and over burdened. Freelancers should be taxed equally. I think this should apply across the board. Though I think everyone paying these taxes should get a long term benefit like pension against those taxes and medical quota. So it worth!
Thats absolute non-sense. Instead of trying to compete to retain the talent, PASHA is advocating for a complete non sense policy that will not only impact the foreign currency coming into the country, but also lead to more talent leaving the country. Its a very selfish demand.
Budget 2025 is a death knell for every Pakistani except for the powerful and the wealthy.
These leeches want freelancers to be taxed so they end up working for lobbying like pasha who give slavery and peanuts to their employees when getting richer and richer themselves.
If they tax the remote workers then these remote workers will simply keep the money outside of country or move out of country entirely and country will lose the precious foreign money.
No one is going to start paying 35% tax if there is anyway to avoid it. And no one is going to go back to working for these leachers
Shame on you for acknowledging such a horrendous view
P@sha is truly only safeguarding the interest of big software houses. They don’t care about the freelancers or small business that rely on one or two clients.
Instead of paying there employees competitive salaries for retention and asking for lower rates, they are targeting freelancers and small business with low client base. Probably it’s time to ditch Pasha and create freelancers body to protect their rights.
P@sha has become bunch of big software houses monopoly. They get all the software exports benefits and crying for retention. Give your employee fair share and ask the government for lower tax rate, instead of coming after small business and freelancers.