Pakistan IT association proposes budget reforms to propel exports to $4 billion

The Pakistan Software Houses Association (P@SHA) has presented budget proposals for the next fiscal year aimed at driving growth in the IT and IT-enabled services (ITeS) sector. The recommendations outline measures including tax reforms, skill-building programs, and infrastructure enhancements designed to make Pakistan a leading global technology hub.

P@SHA's tax reform recommendations focus on reinstating the Final Tax Regime (FTR) for IT/ITeS exports for a decade (2025–2035), emphasizing its importance for investor confidence. The FTR, which imposes a 0.25% withholding tax on export revenues for Pakistan Software Export Board (PSEB)-registered firms, is set to expire in 2026.

Additional suggestions include exempting corporate debit card transactions associated with Exporters' Special Foreign Currency Accounts (ESFCAs) from double taxation, harmonizing tax policies for remote workers and salaried employees to curb brain drain, and extending startup income tax exemptions to five years while increasing turnover limits to PKR 275 million.

P@SHA also proposed reducing bureaucratic hurdles by streamlining tax exemption certificates under Sections 152 and 159 of the Income Tax Ordinance.

Acknowledging Pakistan's $3.223 billion IT export milestone in FY 2023-24 — a 24% rise compared to the previous year — P@SHA emphasized bridging the sector’s skills gap. Proposed initiatives include a nationwide program with a budget of PKR 4.5 billion to train 20,000 graduates, PKR 2 billion for upskilling professionals in emerging fields like AI and blockchain, and a PKR 3 billion "Train the Trainer" program to equip university faculty with industry-relevant expertise.

To improve Pakistan’s international image and attract foreign investors, P@SHA suggested allocating PKR 3 billion for a rebranding campaign. This effort would feature success stories, sponsorship of global tech events, and the launch of a “TechDestination” initiative.

Additionally, the association addressed the underutilized potential of the Special Technology Zones Authority (STZA). Recommendations include creating Virtual Special Technology Zones (STZs) to provide benefits to firms outside designated areas and reducing the minimum area requirement for STZ applications to include mid-tier cities.

P@SHA Chairman Saijad Mustafa Syed stressed the industry's contribution to economic resilience, employing over 600,000 professionals. "These proposals pave the way for achieving the government's $4 billion IT export goal for 2025," he stated.

The recommendations were developed in collaboration with policymakers, tax consultants, and key players like PSEB and the Ministry of IT.

The finalized proposals will be submitted to the Ministry of Finance and Federal Board of Revenue (FBR) for consideration in the upcoming fiscal budget.