The Pakistan Software Houses Association (P@SHA) has raised serious concerns over the federal Budget 2025-26, warning that it could severely damage the country’s promising IT and IT-enabled Services (ITeS) sector.
In a strong statement, P@SHA said the budget will be remembered not for its promises, but for its dangerous omissions. It described the fiscal plan as a major setback for an industry employing over 600,000 skilled youth and driving Pakistan’s digital and export ambitions.
The government has failed to address two critical issues: the lack of a defined taxation framework for remote workers, and the absence of continuity in the tax regime for formal IT exporters. Despite repeated appeals, the industry’s demand for a stable 10-year tax policy remains unheeded.
P@SHA highlighted a growing disparity between remote workers earning significant income from foreign companies—who are largely untaxed—and local IT firms that are heavily taxed and regulated. This imbalance is discouraging local hiring and driving capital abroad, undermining job creation and economic formalization.
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The association reiterated its call to classify individuals earning over Rs. 2.5 million annually from fewer than three foreign clients as remote workers—a measure that would only affect the top 5% of earners and not harm freelancers or small remitters. P@SHA emphasized that the State Bank already possesses the data required to implement this policy swiftly.
Additionally, the government’s failure to extend the current tax incentives for exporters threatens over $700 million in foreign investment commitments made under the Digital Foreign Direct Investment (DFDI) initiative. Investors are unlikely to commit to a country where tax policies change unpredictably.
P@SHA warned that without urgent government action, Pakistan risks stalling its fastest-growing and most globally competitive industry. The budget, as it stands, could derail efforts to reach $25 billion in IT exports, reduce employment opportunities, and shift the sector toward informality.
“This is no longer about incentives. It’s about safeguarding one of Pakistan’s few economic success stories. Time is running out,” the association cautioned.
