Experts warn against taxing freelancers, content creators

Pakistan's freelance community has voiced strong opposition to proposed taxation measures in the upcoming federal budget targeting freelancers and content creators—including YouTubers, vloggers, and TikTokers—urging the government to prioritise foreign exchange inflows and economic inclusion instead.
Pakistan Freelancers Association (PAFLA) Chairman Ibrahim Amin said the government must avoid creating an impression that a large number of content creators will be brought under the tax net, as this could discourage struggling freelancers and budding digital creators. However, he suggested that the Federal Board of Revenue (FBR) could consider taxing a select group of high-earning entertainment content creators with substantial followings and revenues. Amin urged the government to categorise content creators carefully, exempting those who provide educational content and skills training to millions of subscribers in Pakistan and abroad from any new tax burden.
He pointed out that both the public and private sectors have invested heavily in developing freelancers and digital creators, who have used these skills to support their families and attract much-needed foreign exchange into the country. Despite challenges such as frequent internet disruptions and electricity outages, freelancers' income surged to $400 million during the nine months of FY25, according to the latest Pakistan Economic Survey. Amin pointed out that most freelancers already pay taxes on every transaction and also bear deductions charged by freelancing platforms and payment gateways for transaction services.
Estimates suggest there are around 2.37 million freelancers in Pakistan, making it the fifth-largest freelance workforce globally.
"If we double the size of this community, annual foreign exchange inflows could exceed the $1 billion mark," said the PAFLA chief.
Hisham Sarwar, a social media influencer and a well-known digital skills and freelancing trainer, said the government must support the freelancing sector's efforts to bring foreign exchange into Pakistan rather than introduce measures that may create fear and discourage digital workers. Citing Bangladesh as an example, Sarwar noted that tax holidays and cashback incentives for its IT sector and freelancers have driven rapid growth. Pakistan, he argued, should strengthen its high-potential IT sector similarly to boost exports to $10 billion per annum.
Sarwar described Pakistan's freelancing market as limited but fast-growing, thanks to the talent and creativity of its youth. The rising adoption of artificial intelligence (AI) tools, he said, would likely attract more skilled individuals to the IT industry, potentially revolutionising the services and product sectors and delivering greater foreign exchange earnings than the proposed tax revenues.
He warned the government against imposing new taxes inspired by the lifestyles of a small fraction—less than 1%—of luxury-living vloggers. Such measures, he said, would harm the entire industry.
Pakistan Software Houses Association (P@SHA) Senior Vice Chairman Muhammad Umair Nizam said the IT sector has already proven its ability to attract valuable foreign exchange and foreign investment, aided by government incentives, tax holidays, and aggressive marketing drives.
Nizam stressed that expanding IT exports would help reduce the country's current account deficit while empowering the youth to improve their living standards through employment in the IT and freelancing sectors.
He also reiterated his call for an extension of the Final Tax Regime (FTR) for freelancers and IT exporters by up to 10 years and urged the government to allocate funds in the budget for capacity building of IT professionals and students.
During July-March FY2025, IT and Information Technology Enabled Services (ITeS) achieved a trade surplus of $2.429 million, a 21.6% increase from $1.997 million last year, despite frequent internet disruptions during the fiscal year.
The Pakistan Economic Survey 2024-25 highlighted other key indicators for the IT and telecommunications sector, including $2.825 million in IT exports, $2.429 million in trade surplus for IT and ITeS, $400 million in freelancers' remittances, Rs803 billion in telecom revenues, 147.2 million broadband subscribers, and a total of 199.9 million telecom subscribers.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Express Tribune

8 hours ago

• Express Tribune

FBR extends software integration date

The Federal Board of Revenue has extended the deadline for both corporate and non-corporate sectors to integrate their invoicing and sales transaction software with FBR's computer system through PRAL or any FBR-licensed service provider. Registered taxpayers in the corporate sector are now required to connect their software with the FBR system starting July 1, while non-corporate registered taxpayers have been given time until August 1. The directive mandates that all relevant entities must ensure that their invoicing software is either integrated through PRAL or any other FBR-licensed technology provider, in order to comply with the authority's digital reporting.

Express Tribune

a day ago

• Express Tribune

Inflation, rupee dip lift FBR taxes

Listen to article Owing to massive inflation-driven increases in nominal collections, sharp currency depreciation, and a greater reliance on indirect taxes, the Federal Board of Revenue (FBR) has achieved its annual revenue growth rise from an average of 18% over the past decade to 24% in the recent five years. The FBR has demonstrated a remarkable acceleration in tax collection growth over the past five years, surpassing the average pace observed over the preceding decade. Data from the FBR, Ministry of Finance (MOF), and Arif Habib Limited (AHL) Research reveals that annual revenue growth averaged 24% during this period, significantly higher than the 10-year average of 18%. "The rise in FBR's annual revenue growth, from an average of 18% over the past decade to 24% in the recent five years, reflects a mix of policy adjustments and economic factors," noted AHL. "The higher growth is partly attributed to inflation-driven increases in nominal collections, currency depreciation, and a greater reliance on indirect taxes." This upward trend illustrates both nominal tax collections and growth rates, with the former rising from Rs3.11 trillion in the base year, fiscal year 2016, to Rs14.13 trillion in the most recent year — reflecting a strong compound growth trajectory. Notably, growth rates peaked at 35% in certain years before moderating, highlighting the recent surge in tax mobilisation. Several factors have driven this performance. Inflation and currency depreciation played a central role, inflating nominal tax collections, especially on goods and services subject to ad valorem taxes. The weakening rupee also raised the local currency value of import-based taxes, a key revenue source. On the policy front, the withdrawal of tax exemptions under International Monetary Fund (IMF) programmes expanded the taxable base, while the government's reliance on indirect taxes — such as sales tax and customs duties — further fuelled collection growth, though it raised equity concerns. Administrative reforms, including efforts to document the informal economy, digitise tax filings, and curb evasion, also contributed to improved compliance and revenue outcomes. Despite this strong showing, questions remain over the sustainability of such growth. Much of the recent gains are rooted in inflationary effects and indirect taxation — factors that may not sustain momentum without deeper structural reforms. Reliance on import-based taxes leaves revenues vulnerable to external shocks or a decline in trade volumes, while over-dependence on indirect taxes disproportionately burdens lower-income groups, underscoring the need for a more balanced and equitable tax policy. Looking ahead, the FBR's continued progress will depend on its ability to broaden the tax base by formalising untapped sectors, shift towards more stable revenue streams such as direct taxes, and enhance transparency to build public trust and voluntary compliance. While the recent growth trajectory signals a positive departure from past trends, its translation into lasting fiscal strength will ultimately hinge on the government's commitment to comprehensive and sustained reforms amid evolving economic challenges.

Business Recorder

a day ago

• Business Recorder

Investment in SCRAs: 12-month holding period proposed for tax concession: FBR chief

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial Saturday said the FBR has proposed a holding period of 12 months for availing concessionary tax regime on investment made in Special Convertible Rupee Accounts (SCRA) under Finance Bill (2025-26). While review of Finance Bill (2025-26) on Saturday at the National Assembly Standing Committee on Finance, Chairman of the Finance Committee Naveed Qamar said that the condition of 'holding period' would discourage investment in the SCRA. The government should set 3-6 months holding period for making investment in the SCRA. The FBR chairman endorsed the viewpoint of Naveed Qamar. The FBR chairman said that we can propose six months holding period. The FBR has already discussed the proposal with the State Bank of Pakistan (SBP). In case of three months proposal, this should be subject to the approval of the Federal Cabinet. FBR directed to immediately stop sealing Tier-1 retail outlets MNA Mirza Ikhtiar Baig stated that the government must watch interest of the overseas Pakistanis making investment in the SCRA. Later, an official of the SBP joined the meeting online from Karachi. Muhammad Ali Malik, executive director SBP informed the committee that the proposed amendment has nothing to do with the Roshan Digital Account. The proposed change is related to the SCRA and not Roshan Digital Account. There should be some limitation of holding period for keeping investment in the SCRAs. We want to discourage short-term investments in the SCRAs. If they keep investment above one year period, the concessional tax regime should be applicable. To avoid volatility in market, the holding period should be one year for the purpose of making investment in the said accounts. The tax advantage should be given to those investors who would keep their investment for at least one year. According to the assessment of the SBP, there would be no immediate or significant impact on investment in case one year holding period is introduced, the SBP official added. The finance committee proposed six months holding period for availing concessionary tax regime on the SCRAs investments. Copyright Business Recorder, 2025