The retail landscape in Pakistan, along with several other countries, has undergone significant transformation due to the rapid growth of e-commerce. In response to this shift, the government is considering imposing taxes on digital platforms based on recommendations from the International Monetary Fund (IMF).
Recently, Pakistan and the IMF reached a staff-level agreement on the second and final review under the $3 billion Stand-By Arrangement (SBA). Additionally, Islamabad has expressed interest in a successor medium-term Fund-supported program.
In order to enhance revenue collection, the IMF has proposed implementing a general sales tax and value-added tax on digital platforms operating in Pakistan. The proposal suggests that e-commerce platforms, which play a crucial role in transactions with consumers, should be subject to taxes on their products and services. This would include sales made by non-resident vendors to local consumers.
However, platforms that function primarily as advertising mediums, allowing vendors to list services, are likely to be exempt from these proposed taxes. The IMF further recommends taxing transactions involving digital products or services sold by non-resident sellers to government departments, treating them as business-to-business transactions.
