P@SHA Proposes Key Reforms in Federal Budget 2025-26 for IT Sector Growth

• Private sector seeks stable policies, fair taxation for remote workers, and digital-friendly reforms

KARACHI — As the federal government prepares to finalize the upcoming Budget 2025-26, private sector associations are stepping forward with proposals to shape a more inclusive, growth-driven financial roadmap for the country. One such influential voice is the Pakistan Software Houses Association for IT & ITES (P@SHA), which has unveiled a comprehensive set of recommendations aimed at strengthening Pakistan’s digital economy.

It’s a common practice worldwide for industry bodies, trade groups, and private sector stakeholders to present pre-budget proposals to the government. These proposals help bridge gaps between policy and ground realities, ensuring that industry-specific challenges and growth opportunities are recognized and addressed in the national budget. In Pakistan, this collaborative approach has become increasingly vital as the country looks to stabilize its economy and boost exports through sectors like information technology.

P@SHA’s Budget 2025-26 Proposal: Focused on Reform and Sustainability

P@SHA’s latest budget proposal for FY 2025-26 lays out a reform-oriented, forward-looking framework to unlock the full potential of Pakistan’s IT and digital services sector. The association stresses that a modern, globally competitive ecosystem is key to enhancing exports, attracting investment, and generating employment in the digital economy.

Here are the three critical areas of policy action identified in P@SHA’s proposal:

1. Align Payroll Taxation for Remote Professionals

One of the major recommendations is to formally recognize remote professionals in the Income Tax Ordinance. With thousands of Pakistani IT professionals working remotely for international companies and bringing in foreign exchange through remittances, a lack of clarity in the current taxation framework creates confusion and inefficiencies.

Key goals of this reform include:

• Ensuring fair taxation of remote workers.
• Broadening the tax net with transparency.
• Supporting local companies by offering a level playing field in global talent markets.

According to P@SHA, a consistent and transparent taxation structure for remote professionals will encourage compliance, support foreign exchange inflows, and reduce regulatory ambiguities.

2. Ensure Continuity in Tax Policy

In a sector where long-term planning and investor confidence are crucial, policy unpredictability can be damaging. P@SHA emphasizes the need for stable and continuous tax policies to sustain the momentum built over recent years.

With the IT industry drawing nearly USD 700 million in investment recently, the association urges the government to avoid abrupt changes that could disrupt growth trajectories.

P@SHA recommends:

• Maintaining consistent tax incentives for IT exporters.
• Avoiding retrospective tax policy changes.
• Engaging stakeholders before making key fiscal decisions.

Such measures will create a trustworthy investment climate and attract further domestic and international capital into Pakistan’s IT sector.

3. Enhance Ease of Doing Business in the Digital Economy

Pakistan’s regulatory environment still poses major bottlenecks for digital startups and tech firms. From outdated labor laws to cumbersome processes for repatriating capital, several legacy systems are holding back progress.

To tackle this, P@SHA proposes a comprehensive regulatory modernization drive, including:

• Digitizing capital repatriation procedures to allow smoother foreign payments and investments.
• Updating labor laws to suit flexible and remote work models common in tech.
• Simplifying company registration and compliance processes for tech businesses.

Streamlining these systems will reduce red tape, improve Pakistan’s global competitiveness, and allow businesses to scale faster.

A Call for a Future-Ready Policy Framework

P@SHA’s budget proposal concludes with a clear message: It’s time to embrace digital transformation through smart policymaking. The association believes that by enabling ease of doing business, stabilizing tax structures, and supporting remote professionals, the government can unlock innovation, boost IT exports, and drive sustainable economic growth in Pakistan.

With the IT sector increasingly seen as a strategic pillar of Pakistan’s economy, budgetary support and meaningful reforms can pave the way for a resilient digital future.