The proposed IT companies tax hike arrives just as Pakistan’s tech exports and freelance earnings hit record highs
Pakistan’s technology sector is booming. However, the upcoming budget may throw a serious obstacle in its path. The federal government is reportedly considering raising the tax rate on IT companies from 0.25 percent to 1 percent. That is a 300 percent increase — and it has alarmed industry stakeholders.
The timing could not be more sensitive. ICT export remittances rose nearly 20 percent to $3.388 billion during July-March of FY2025-26. That compares to $2.829 billion in the same period last year. The freelance economy also delivered a standout performance. Freelancer remittances surged 51 percent year-on-year to $856.3 million. These figures come directly from the Pakistan Economic Survey 2025-26.
The proposed IT companies tax hike therefore arrives at a moment when the sector deserves encouragement rather than added burden.
Industry voices have already pushed back. The Pakistan Freelancers Association recently urged the government to maintain supportive tax policies for the digital economy. PAFLA specifically called on the Federal Board of Revenue and the Ministry of Finance to retain the existing 0.25 percent rate. They want this rate protected for at least the next decade.
The association also recommended establishing freelancing hubs across major cities. Additionally, it proposed subsidies for internationally recognized certifications. New initiatives to strengthen digital workforce skills also featured in their recommendations.
Their core argument is straightforward. A competitive tax regime drives export growth and attracts investment. Furthermore, the current low rate actively incentivizes freelancers to route earnings through formal banking channels. This directly boosts documented foreign exchange inflows for Pakistan.
Raising that rate risks reversing this progress. Higher taxes could push earnings back into informal channels. They could also discourage new entrants into the sector. Moreover, international clients and investors already evaluating Pakistan as a technology outsourcing destination may reconsider.
The government has yet to make a final decision. Today’s budget presentation will clarify whether the proposed increase moves forward or gets shelved. For Pakistan’s technology sector, the next few hours could prove defining.
