The Asian Development Bank (ADB) has recommended that Pakistan implement a uniform 5% general sales tax (GST) on all digital transactions. The goal is to promote digital payments, support e-commerce growth, and reduce the inefficiencies linked to a cash-heavy economy. This flat tax rate could also help attract investment in the country’s digital sector.
In its latest report on Pakistan’s digital ecosystem, the ADB warned that high and inconsistent taxes on digital services pose a serious threat to the sector’s growth and investment potential. Currently, internet services face a steep 19.5% provincial sales tax, which the ADB says discourages expansion and increases the digital divide — especially among women and marginalized communities.
The report pointed out that telecom revenues and foreign investments have declined, reflecting a difficult business environment. The ADB urged the government to engage more closely with industry stakeholders, offering them incentives and a stable tax regime for at least 10 years to restore confidence.
To support digital growth, the ADB also called for reforms like lowering Right of Way (RoW) costs for telecom infrastructure, supporting local smartphone production, and offering a 3% R&D allowance on tech exports. These steps, it says, will improve connectivity and affordability for users, particularly in underserved areas.
Finally, the ADB emphasized the need for public–private partnerships (PPPs) and affordable devices to boost internet access. It recommended installment-based smartphones and locally tailored PPPs to help bridge Pakistan’s digital gap and create long-term economic benefits.