Latest news with #PakistanSoftwareHousesAssociation
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.
Express Tribune
02-06-2025
- Business
- Express Tribune
P@SHA Chairman urges government not to introduce any new taxes for IT
The Pakistan Software Houses Association (P@SHA) has called on the federal government to not introduce any new taxation and a business-friendly package for the country's information technology sector in the upcoming fiscal budget, set to be presented on June 10. In a statement to the media, P@SHA Chairman Sajjad Mustafa Syed disclosed that of the $700 million invested in Pakistan's IT industry, $600 million originates from companies affiliated with the association. He emphasised the sector's dependence on stability, consistent policies, and supportive incentives to ensure continued growth. 'We are urging the government to implement a fixed tax regime for the next ten years, from 2025 to 2035, and to commit to this in the FY26 budget,' said Syed. Syed also advocated for the continuation of the 0.25 percent withholding tax rate for companies registered with the Pakistan Software Export Board (PSEB) beyond 2026 under the proposed fixed tax system. Highlighting a disparity in tax rates within the sector, he pointed out that remote IT freelancers face a tax rate of only 1 percent, while salaried employees may pay up to 35 percent in income tax. Syed called on the government to harmonise tax treatment across employment categories in the industry. He also underscored the need to ease the transfer of foreign currency revenues, warning that inconsistent policies may hinder foreign direct investment in Pakistan's tech ecosystem. 'Without decisive, pro-business reforms, nearly 600,000 jobs in the IT sector could be jeopardised,' he cautioned.
Business Recorder
23-05-2025
- Business
- Business Recorder
Bridging policy gaps in IT sector
EDITORIAL: The increasingly pivotal role that the country's IT sector plays in driving national development — by creating jobs, generating vital tax revenue, boosting exports, and attracting both domestic and foreign investment — positions it as a potentially transformative engine of inclusive and sustained economic growth. Even amid the economic turmoil of recent years, the sector has remained a resilient performer, and is set to contribute close to USD4 billion in exports by the close of the current fiscal year. By 2030, this figure is expected to surge to USD15 billion. Despite this promising outlook, numerous facets of the government's approach to the IT sector continue to impede its growth, and prevent it from realising its true potential. In a recent press briefing, the chairman of the Pakistan Software Houses Association (P@SHA) outlined key hurdles facing the IT sector, including policy unpredictability, ad hoc taxation measures and operational bottlenecks. He emphasised how these issues undermine investor confidence and constrain the sector's economic contributions. At the heart of these difficulties lie the frequent changes in tax regulations, ranging from export incentives to withholding taxes and other fiscal measures, which discourage long-term investment. Sudden and arbitrary changes to the tax framework weaken investor confidence, jeopardising years of effort by Pakistani software houses and IT companies to build global credibility, nurture talent and develop robust digital infrastructure. Pakistan currently imposes one of the highest corporate tax rates in the region at 29 percent, compounded further by elevated auxiliary taxes and high input costs. In contrast, the UAE maintains a rate as low as nine percent, while Vietnam's stands at 25 percent. Vietnam's streamlined government policies and predictable tax environment, in fact, have helped its annual exports surge to a highly impressive USD141 billion, underscoring the vast potential Pakistan could also unlock in export earnings if its IT sector were supported by a more enabling and competitive tax regime. Persistently high tax rates risk pushing IT firms to more favourable jurisdictions, weakening local industry and forfeiting future gains. While our chronic struggle with low tax revenues is well-documented, uncompetitive tax structures will not resolve the issue, and are more likely to deter investment, drive capital outflow and ultimately worsen the revenue shortfall they aim to address. Another critical issue is the misalignment in tax treatment between employees of IT firms operating domestically and independent remote workers employed by foreign companies. As P@SHA has noted, despite the rapid growth of remote work in recent years, remote workers remain undefined under the Income Tax Ordinance, 2001. This legislative gap has led to a significant disparity: while IT companies must withhold an additional 30 percent income tax from employees earning over Rs2.5 million annually, remote workers earning similar incomes are not subject to the same tax burden. This imbalance puts local firms at a competitive disadvantage, making it harder for them to attract and retain top talent, as skilled professionals prefer opportunities with foreign employers offering higher take-home pay. This also discourages international companies from establishing a physical presence in Pakistan, as they can access the same talent pool remotely without dealing with the associated tax implications. Rectifying this disparity is essential to creating a level playing field and fostering a policy environment that supports both local industry growth and foreign investment. Pakistan stands at the cusp of a vital transformation in its IT sector, where it could emerge as a truly competitive player in the global digital economy. But this opportunity could slip away if the regulatory environment remains riddled with unclear tax rules, inconsistent incentives and constraints on digital freedoms. The authorities must pivot towards a more forward-looking, coherent and enabling policy framework that empowers innovation, protects digital rights, and attracts both talent and investment. Copyright Business Recorder, 2025
