IT association urges predictable tax policy to unlock tech investment in Pakistan

The Pakistan Software Houses Association (P@SHA) has urged the federal government to introduce a stable and predictable tax and compliance regime for the country’s technology and IT-enabled services (ITeS) sector.

Through its “Continuity & Consistency” reform package submitted to the Ministry of Finance ahead of the federal budget, P@SHA aims to slash compliance costs, expand the formal tax base, and attract both domestic and foreign investment into the tech ecosystem.

“Every serious investor, local or international, asks the same two questions: What will my tax exposure be, and will the rules change after I invest?” said the chairman of P@SHA in a statement. “Right now, innovators spend too much time navigating overlapping regimes and too little time building export-earning products. If we hard-code continuity and make compliance near effortless, capital will move to Pakistan.”

Among the key reforms proposed is the continuation of the 10-year Final Tax Regime (FTR) on IT/ITeS export income, which P@SHA argues is crucial for ensuring long-term certainty and aligning with international investment benchmarks.

The association also advocates for tax rate rationalization, noting that current policies penalize domestic IT companies for paying salaries locally, creating a disincentive for formal employment.

P@SHA has proposed the creation of a dedicated Roshan-Digital-style foreign currency (FCY) channel tailored for the tech sector, allowing for fast FCY receipts, transparent conversion, optional retention, and seamless integration with the Federal Board of Revenue (FBR).

Additionally, the group is calling for reforms to the Super Tax under Section 4C, arguing that FTR-eligible companies should not be burdened by additional tax layers.

To bolster investor confidence, especially for tech startups, P@SHA has recommended a capital gains tax exemption for long-term equity financing.

The package also includes a proposal to harmonize provincial sales tax through the National Tax Council, enabling firms to file a single, creditable return across jurisdictions.

On the labor side, the reform package seeks to consolidate overlapping levies, such as EOBI (Section 46), SESSI, and PWWF, into a single digital window, easing the administrative burden on knowledge-based enterprises.

To implement these reforms, P@SHA has suggested immediate technical collaboration through working groups involving the FBR, Ministry of IT and Telecom, State Bank of Pakistan, National Tax Council, and provincial revenue authorities. These sessions would help translate proposals into policy, legal drafts, digital filing systems, and a phased implementation roadmap.

Emphasizing that these proposals are not subsidies, the association noted they represent digitalization, simplification, and consistency.

With Pakistan’s youthful population, global market reach, and growing startup sector, P@SHA described the country as being at a pivotal moment. “We can compete for high-value digital work globally, but only if investors believe the rules will remain stable,” the statement noted.