The Pakistan Freelancers Association (PAFLA) has urged the Federal Board of Revenue (FBR) and the Ministry of Finance to avoid imposing new taxes on freelancers and the digital workforce in the upcoming Federal Budget 2026-27, warning that additional tax burdens could hamper the growth of Pakistan’s digital economy.
In its budget recommendations, PAFLA called for the continuation of the existing 0.25 percent tax rate on foreign exchange earnings of freelancers for at least the next ten years. The association also proposed a series of measures aimed at strengthening the freelance sector, including the establishment of freelancing hubs across major cities, capacity-building programs, and government support for internationally recognized professional certifications.
PAFLA Chairman Ibrahim Amin said maintaining the reduced tax regime would encourage freelancers to channel their earnings through formal banking systems, helping increase documented foreign exchange inflows and boosting participation among students, women, and young professionals.
He noted that freelancers registered with the Pakistan Software Export Board (PSEB) currently enjoy the concessional tax rate and said the association is working closely with PSEB to simplify registration procedures so that more freelancers can benefit from available incentives.
According to Amin, a predictable and simplified tax structure is essential for sustaining the growth of Pakistan’s freelance ecosystem, software houses, and the broader information technology sector.
Highlighting Pakistan’s growing presence in the global digital economy, he pointed to the International Labour Organization’s recognition of Pakistan as a major provider of digital labour worldwide. He said the country’s expanding freelance workforce demonstrates the increasing competitiveness of its technology sector.
The association also cited data from the State Bank of Pakistan (SBP), which showed that freelancing export earnings reached $959 million during July-April FY2025-26, reflecting a 49 percent increase compared to the corresponding period of the previous fiscal year.
PAFLA President and CEO Dr. Imran Batada urged the government to refrain from introducing additional taxes on content creators producing educational, training, news analysis, and other knowledge-based digital content.
He warned that complicated taxation measures could push freelancers and digital workers toward informal channels, reducing documented remittances and negatively affecting foreign exchange inflows.
Dr. Batada further stressed the need for improvements in Pakistan’s digital payment infrastructure, including the development of a globally integrated national payment gateway that would facilitate seamless international transactions for freelancers, IT professionals, and technology exporters.
He noted that freelancers have generated nearly $1 billion in foreign exchange earnings during the current fiscal year and emphasized that Pakistan’s young digital workforce represents a significant opportunity for export growth, job creation, and economic development.
Tax Impact
If the government retains the existing 0.25 percent tax regime, freelancers registered with PSEB will continue to benefit from one of the lowest tax rates available for export earnings in Pakistan. The continuation of this policy could encourage greater documentation of foreign income, increase banking channel transactions, and support the government’s broader objective of expanding IT and freelancing exports.
However, any increase in tax rates or introduction of new compliance requirements could raise operational costs for freelancers, discourage formal remittances, and potentially affect the sector’s contribution to foreign exchange earnings.
