The Pakistan Software Houses Association (P@SHA) has called on the government to prioritize policy stability and tax clarity for the IT and IT-enabled Services (ITeS) sector in the upcoming Federal Budget 2025–26. In a press release issued on May 20, 2025, P@SHA highlighted the sector’s resilience, noting that IT exports reached $3.2 billion in FY 2023–24 and are projected to approach $4 billion by the end of the current fiscal year. With forecasts estimating a $15 billion export potential by 2030, P@SHA warned that inconsistent policies and ad hoc taxation continue to undermine investor confidence and the sector’s economic contributions.
P@SHA’s recommendations include formally defining remote workers in the Income Tax Ordinance to align the tax treatment of independent remote workers and employees of IT firms. The association argues that the current disparity incentivizes global companies to bypass local firms, eroding Pakistan’s export revenue and competitiveness. By creating a fair and transparent framework, P@SHA believes the government can expand the tax base and protect the country’s economic interests.
The association also stressed the importance of continuity in tax policy, pointing out that frequent changes in tax laws discourage long-term investment and threaten recent progress in branding, skill development, and digital infrastructure. P@SHA cited the recent DFDI event, which resulted in over $700 million in investment commitments, as evidence of the sector’s potential—provided the policy environment remains stable.
Operational challenges, such as harassment by federal and provincial bodies and outdated labor regulations, were also highlighted as barriers to growth. P@SHA urged the government to digitize processes for international capital repatriation and provide temporary exemptions from certain labor laws until comprehensive reforms are enacted.
A regional benchmarking annexure included in the release compared Pakistan’s IT sector to those of Bangladesh, Vietnam, the Philippines, UAE, KSA, and Malaysia. The data showed that Pakistan offers some of the shortest tax incentive durations and faces higher input costs, making it less competitive than its regional peers.
P@SHA concluded by urging the government to view these recommendations not as concessions, but as strategic investments in Pakistan’s digital future, warning that without urgent reforms, the country risks losing its digital momentum to more agile economies.
