ISLAMABAD: Pakistan’s thriving information technology (IT) sector may face a significant increase in taxation under the Federal Budget 2026-27, as the government is reportedly considering raising the tax rate on IT companies from 0.25 percent to 1 percent.
According to informed sources, the proposed revision would effectively increase the tax burden on IT companies by 300 percent, a move that has sparked concern within the country’s rapidly growing digital economy.
The proposal comes despite strong performance by the IT and telecom sector, which has emerged as one of Pakistan’s leading contributors to export earnings. Data from the Pakistan Economic Survey 2025-26 shows that Information and Communication Technology (ICT) export remittances increased by nearly 20 percent to $3.388 billion during July-March FY2025-26, compared to $2.829 billion in the same period of the previous fiscal year.
Pakistan’s freelance economy has also maintained impressive momentum. Freelancer remittances surged by 51 percent year-on-year to $856.3 million, reflecting the growing role of digital professionals in generating foreign exchange and supporting economic growth.
The proposed tax increase has surfaced shortly after the Pakistan Freelancers Association (PAFLA) urged the government to preserve existing tax incentives for freelancers and the broader digital sector in the upcoming budget.
In its budget recommendations, PAFLA called on the Ministry of Finance and the Federal Board of Revenue (FBR) to retain the current 0.25 percent tax rate on foreign exchange earnings for at least the next ten years. The association argued that a stable and competitive tax framework is essential for sustaining export growth, attracting foreign investment, and strengthening Pakistan’s position in global digital markets.
PAFLA also proposed the establishment of dedicated freelancing hubs in major cities, subsidies for internationally recognized professional certifications, and skill development programs aimed at enhancing the competitiveness of Pakistan’s digital workforce.
Industry stakeholders have expressed concerns that higher taxes could discourage investment and slow the momentum of one of the country’s fastest-growing export sectors. However, officials say no final decision has yet been announced, and clarity is expected during the federal budget presentation.
The IT industry is closely watching the budget announcement, as any change in the tax regime could have far-reaching implications for software houses, technology firms, exporters, and freelancers across Pakistan.
