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Business Recorder
12-06-2025
- Business
- Business Recorder
Budget to spell doom for Pakistan's IT industry: P@SHA
KARACHI: Outrightly rejecting the budget 2025-26, IT industry said budget has fatally ignored Pakistan's IT and IT-enabled Services (ITeS) sector, terming disappointment and grave threat to the sector. In a statement, Pakistan Software Houses Association (P@SHA) said budget is decisive blow to an industry that has carried the hopes of export-led recovery; youth employment and digital transformation. It said 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 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, P@sha said, 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 PKR 2.5 million annually from fewer than three foreign sources as a remote worker. This affects only the top 5% of earners and avoids harming freelancers and small remitters. 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 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. Copyright Business Recorder, 2025
Business Recorder
12-06-2025
- Business
- Business Recorder
Budget to spell doom for IT industry: P@SHA
KARACHI: Outrightly rejecting the budget 2025-26, IT industry said budget has fatally ignored Pakistan's IT and IT-enabled Services (ITeS) sector, terming disappointment and grave threat to the sector. In a statement, Pakistan Software Houses Association (P@SHA) said budget is decisive blow to an industry that has carried the hopes of export-led recovery; youth employment and digital transformation. It said 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 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, P@sha said, 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 PKR 2.5 million annually from fewer than three foreign sources as a remote worker. This affects only the top 5% of earners and avoids harming freelancers and small remitters. 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 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. Copyright Business Recorder, 2025
Business Recorder
11-06-2025
- Business
- Business Recorder
Budget is ‘death knell' for IT industry: P@SHA
The budget has failed to address two urgent standing demands from the IT sector: a defined and fair taxation framework for remote workers, and the continuation and expansion of the current tax regime for formal IT exporters, according to the Pakistan Software Houses Association (P@SHA). In a statement on Wednesday, the association said the industry's repeated demand for a 10-year tax policy framework—one that allows companies to invest, grow and compete with global peers, has been ignored. It described this as a 'stunning act of neglect' and a 'quiet but decisive blow to an industry that has carried the hopes of export-led recovery, youth employment and digital transformation.' It added that for an industry that employs over 600,000 young Pakistanis and is one of the country's largest and most vital pools of skilled talent, 'this budget is not just a disappointment; it is a threat.' According to the association, high-earning remote workers employed by foreign companies, who are 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.' It added that 'talent retention is collapsing; export dollars are being parked abroad, and formal firms are bleeding value.' Brain drain: Pakistan lost 727,381 workers to overseas employment in 2024 P@SHA said the government's refusal to act is particularly frustrating given the simplicity of its proposed solution: classifying any individual earning over Rs 2.5 million annually from fewer than three foreign sources as a remote worker. It believes this will affect only the top 5% of earners and avoids hurting freelancers and small remitters. It also said the government needs to extend the existing tax regime for exporters. It added that the $700 million in investment commitments secured through the Digital Foreign Direct Investment (DFDI) initiative is in jeopardy due to a lack of continuity in tax policy as 'foreign investors will not engage with a country where rules shift every year.' P@SHA said the budget '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.' It warned that export growth will stall; jobs will disappear and the government's dream of reaching $25 billion in IT exports will become permanently out of reach. It said the 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. It warned that '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.' Pakistan's IT sector a bright spot The warning comes amid a report from i2i, which notes that Pakistan's IT sector has emerged as a bright spot in the country's otherwise sluggish economy, with exports set to reach around $3.7 billion (FY2025) and a predominantly young, tech-savvy population fueling growth. It said that in the first ten months of fiscal year 2025, IT exports reached $3.1 billion, marking a robust 21% year-on-year (YoY) increase. Notably, April 2025 saw monthly IT exports of $317 million, up 2% YoY, though down 7% month-on-month (MoM). This figure remains above the 12-month average of $314 million, reflecting the 19th consecutive month of YoY export growth starting from October 2023. Looking ahead, experts predict Pakistan's IT sector will continue its upward trajectory, expecting 10-15% growth in FY25, reaching $3.5–3.7 billion in exports. The government's ambitious 'Uraan Pakistan' economic plan targets $10 billion in IT exports by FY29, implying a compound annual growth rate (CAGR) of 28%. However, it warned that despite this momentum, structural issues remain. Freelancers, who contribute significantly to digital exports (projected to exceed $500 million in FY25), face hurdles such as limited access to international payment gateways like PayPal, unclear taxation, and a lack of tailored banking services. Moreover, the regulatory landscape around emerging fintech, including cryptocurrencies and digital assets, is still evolving.
Business Recorder
07-06-2025
- Business
- Business Recorder
Will the budget provide ‘deep reforms startups truly need to thrive'?
With the budget announcement just around the corner, Business Recorder spoke to several people associated with the country's startup ecosystem to understand their hopes and expectations. Amid dwindling startup funding, some remain optimistic, while others believe the budget will only provide surface-level policies that will not truly go to the heart of the needs of the ecosystem. According to Syed Azfar Hussain, Project Director Project Director National Incubation Center Karachi the upcoming budget, expected to be announced on June 10, 'can significantly support startups by including seed grants,tax incentives, and export facilitation.' He told Business Recorder that investment in digital infrastructure like cloud services and skills development will also help startups scale more efficiently as will support for innovation through public procurement. When asked if his expectations align with what he would like to see in the budget, he said he was optimistic. 'The government has shown increased interest in promoting the digital economy. We hope to see continued support for the Pakistan Software Export Board, which has advanced freelancer training and IT export promotion including the recent Digital Foreign Direct Investment event in Islamabad, and the Ignite National Technology Fund, whose role in funding incubation, R&D, and entrepreneurial programs has been vital.' Pakistan secures $700m in investment pledges at first Digital Foreign Direct Investment forum He believes that if these efforts are further facilitated and expanded in the budget, 'it will align well with our hopes for a stronger startup ecosystem.' Meanwhile a spokesperson at flexible workspace startup COLABS said that while some support is expected for the startup ecosystem, such as tax relief for the IT sector, youth loan schemes and digital service expansion, 'it has been apparent that these measures only tend to scratch the surface.' Major challenges faced by startups like fragmented tax systems, regulatory uncertainty, limited access to finance, remain largely unaddressed, they said. Their conclusion is that while the budget may offer some help, it still falls short of delivering the deep reforms startups truly need to thrive. 'We hope that the budget has taken into account expert advice that aligns with the startup and venture capital landscape so as to further address the issues of combating large import vs., export bills,' they added. When asked what they would like to see from the government, they explained that access to capital remains one of the biggest hurdles for early-stage founders and scale ups. For this reason, budget provisions that support government-backed venture funds or credit guarantees can be game changers, 'by de-risking investment and encouraging private capital as well via tax incentives and lower interest rates for financing.' COLABS called for public funding for accelerators and startup hubs, especially in and around smaller cities, as it believes this will help grow an inclusive ecosystem by leveling the playing field for startups and SMEs. 'In fact, we hope that enabling space providers as strategic partners to this end will help contribute to the larger startup ecosystem and entrepreneurial community.' Simplified procedures were also on the company's wishlist. The representative said COLABS hoped the budget will introduce policies to add to the ease of doing business and moving with global best practice, introduce simplified and harmonized tax policies, offer tax holidays or incentives for early-stage ventures, and streamline registration, compliance and tracking through a one-window digital portal. Hamad Dawood, founder of the e-commerce concierge service Farmaish, echoed some of these thoughts. He believes 'Building a startup is already hard, so compliance should be a lot easier.' He said Farmaish is a small, bootstrapped e-commerce startup 'so I am liable to pay GST, but Saddar importers, and wholesalers can get away without paying it. So either I'm compliant or I'm priced out of the market by 18% and customers always want to save money.' He also called for a tax holiday for at least 5 years: 'Let companies have a realistic chance to build before they start being taxed.' On his wish list is tax credits for the investments that startups make early and an easier, simpler framework to understand and follow.
Express Tribune
21-05-2025
- Business
- Express Tribune
IT reforms sought to halt exodus
P@SHA has said that the govt will have to decide the future course – either develop the country as a digital powerhouse or remain confined as skilled individuals leave the country. photo: file Listen to article The information technology (IT) sector has warned the government that companies will shift to other countries if favourable policies are not introduced and changes are made in the existing tax regime. Addressing a news briefing on Tuesday, Pakistan Software Houses Association (P@SHA) Chairman Sajjad Syed said that investments were not brought into the country by the government in public sector industries. "Investments are invited by the private sector and the government functionaries have to be facilitators; this includes branding, infrastructure development, skill development as well as the tax and fiscal regime," he said. Syed pointed out that currently Pakistan had one of the highest tax rates and negligible certainty about the consistency of policies. He said corporate income tax was 29% in Pakistan, whereas it was as low as 9% in the United Arab Emirates (UAE) and 25% in Vietnam, which had annual IT exports of $141 billion. Other taxes and input costs were also high in Pakistan. Syed added that the IT industry had demonstrated resilience in the face of economic turbulence, contributing $3.2 billion in exports in financial year 2023-24 and it was projected to close the current fiscal year at nearly $4 billion. "An estimated $15 billion export potential is projected by 2030, but more promising numbers can be achieved if there is policy consistency, a long-term taxation regime and operational facilitation by the government to boost investor confidence," the P@SHA chairman remarked. Among the issues highlighted by the association were the need to align tax treatment between the employees of local IT firms and the independent remote workers employed by foreign companies. P@SHA asked the government to formally define remote workers in the Income Tax Ordinance 2001 as the lacuna was forcing IT companies to collect an additional 30% income tax from employees earning over Rs2.5 million annually, whereas those working for international clients did not have to pay high taxes. "This high income tax on local companies has encouraged international competitors to hire the same human resources in Pakistan at higher wages and even save some amount by paying a low income tax," Syed added. P@SHA also demanded that the government ensure continuity in tax policy and added that the IT sector in Pakistan was still in its formative growth stage. He added that policy stability was essential for sustaining the momentum and referred to a Digital Foreign Direct Investment (DFDI) event, where over $700 million worth of investment commitments were made, of which $600 million was facilitated by P@SHA. "If the tax regime is changed in the upcoming budget, there will only be two choices: either the clients leave Pakistani companies as the cost of business will increase or we shift to any conducive market like the UAE, Vietnam or the Philippines," Syed said. P@SHA has said that Pakistan's IT sector employs over 600,000 skilled human resources, but the government has to decide the future course – either develop the country as a digital powerhouse by promoting artificial intelligence or remain confined at the secondary level as high-end skilled individuals will leave the country to seek jobs abroad.
