ISLAMABAD: Tax relief measures announced in Pakistan’s federal budget are expected to boost export earnings of the country’s information technology (IT) sector by around 20 percent, industry stakeholders said on Sunday.
Pakistan’s IT and IT-enabled services sector has emerged as one of the country’s fastest-growing sources of foreign exchange, generating more than $3 billion annually and employing roughly a million freelancers in addition to formal software firms.
Pakistan on Friday unveiled a Rs18.8 trillion ($67.5 billion) annual fiscal plan, setting ambitious revenue targets and delivering significant relief to the country’s booming technology sector.
A major incentive of the new fiscal policy is the three-year extension of the 0.25 percent Final Tax Regime (FTR) on IT export earnings, now valid until June 2029. Additionally, the advance tax on foreign payments was slashed from 5 percent to 0.5 percent.
“The most important thing in this is the extension of FTR, reduction of payroll tax, reduction of super tax, and reduction of tax on our foreign payments,” Sajjad Syed, chairman of the Pakistan Software Houses Association (P@SHA), told Arab News.
“All these incentives are very welcoming, and they will bring further growth to our IT industry. We believe we will continue the 20 percent growth which we have consistently proven over the last five years.”
The government emphasizes that policy continuity was vital for the sector’s momentum.
“The extension of the 0.25 percent regime gives the IT sector what it values most — certainty. It supports investment, expansion and export growth,” Khurram Schehzad, an adviser to the finance minister, told Arab News.
The concession will help “sustain the strong double-digit growth already being witnessed in Pakistan’s IT exports and strengthens the sector’s long-term growth trajectory,” he said, when asked about the immediate impact on export figures compared to last year.
“The focus is not just tax incentives, but building a complete ecosystem through stability, skills, digital infrastructure, and business-friendly reforms.”
According to P@SHA’s latest position paper, IT exports grew from $2.6 billion in FY2023-24 to $3.8 billion in FY2024-25, and are projected to grow a further 18 percent to $4.5 billion in FY2025-26.
While experts say the sector must sustain an annual growth rate of 22-25 percent to achieve the government’s ambitious long-term target of $15 billion IT exports by 2030, the country’s independent workforce believes budget incentives may help attain required growth.
Tufail Ahmed Khan, a member of the Global Freelancers Union (GFU), called the extension of the FTR till 2029 a “major win for remote workers.”
“Remittances and freelancer incomes are increasing in the country,” Khan told Arab News. “Growth cannot be achieved through heavy taxes, so the government is on the right path.”
He urged the government to give more incentives to freelancers so that they bring “more remittances back home, just like IT companies are doing.”
