As the federal budget approaches, Pakistan’s IT sector has issued a serious warning to the government: reform the tax system or risk losing top companies to other countries. The Pakistan Software Houses Association (P@SHA) stated that without immediate policy improvements, firms may shift operations to more business-friendly nations like the UAE, Vietnam, or the Philippines.
Speaking at a press conference, P@SHA Chairman Sajjad Syed said that the private sector, not the public sector, drives investment in the country. He urged the government to act as a facilitator by ensuring a stable tax policy, supporting infrastructure, and developing tech skills. Syed emphasized that inconsistent policies are hurting business confidence and stalling the sector’s growth potential.
Syed also criticized Pakistan’s high tax rates, calling them uncompetitive compared to other regional countries. He pointed out that Pakistan’s corporate income tax is 29%, while it’s only 9% in the UAE and 25% in Vietnam. These high taxes, along with expensive input costs, reduce profitability and discourage foreign investment in the local IT industry.
Despite the challenges, the sector has shown strong performance, with exports reaching $3.2 billion last fiscal year and expected to hit nearly $4 billion this year. However, Syed said reaching the target of $15 billion by 2030 is only possible with long-term policy consistency and reforms in taxation, especially to close loopholes favoring remote workers employed by foreign firms over local companies.
P@SHA also called on the government to clearly define “remote workers” in the Income Tax Ordinance to address tax inequality. Currently, local employees earning above Rs2.5 million can face taxes up to 30%, while remote workers often pay little to none, giving international firms an unfair hiring advantage over local employers.
Syed concluded by urging the government to treat the IT sector as a national priority. With over 600,000 professionals employed and over $700 million in recent investment commitments, he warned that poor policy decisions could halt progress. “The government must decide if Pakistan wants to be a digital leader or continue losing talent abroad,” he said.