Shoppers in Pakistan have been left reeling as prices on popular online marketplaces like Temu and AliExpress have surged dramatically in the wake of the country’s recently passed budget. Social media is abuzz with complaints, as users report that some products now cost three to four times more than they did just weeks ago.

But while many are quick to blame the government’s new taxes for the sticker shock, the reality is a bit more complicated.

What’s Behind the Price Hike?

The government has introduced the Digital Presence Proceeds Tax Act, which slaps a 5% tax on goods sold in Pakistan by foreign online platforms. Additionally, these platforms are now required to pay an 18% sales tax, bringing them in line with local businesses, which already pay a 18% sales tax and up to 35% income tax on their products.

Previously, international e-commerce giants like Temu and AliExpress operated in Pakistan without paying these taxes, giving them a significant price advantage over local sellers. That loophole has now been closed.

Are Taxes Really to Blame for the 300% Price Jump?

Despite the new taxes, experts say they don’t fully explain the jaw-dropping price increases—some as high as 300%. The more likely explanation is that platforms like Temu have hiked prices preemptively, possibly to cushion themselves against any future, unspecified taxes or duties that might be imposed as the new regulations are implemented.

What’s Next for Online Shoppers?

There’s a silver lining: industry insiders believe these price spikes may be temporary. As the dust settles and there’s more clarity on the new tax regime, prices could stabilize, or even come down, in the coming weeks.