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Islamabad, June 11, 2025: Pakistan’s federal budget was unveiled yesterday, imposing new taxes on digital transactions and e-commerce. It sparked concern among industry leaders, investors, and trade bodies, who warn that new taxes could derail the nation’s journey toward a cashless economy.
Aamir Ibrahim, Chairman of the Telecom Operators Association of Pakistan, expressed both hope and concern in a tweet. He said
“The budget aims to formalize online trade through digital integration and tax measures, which is a plus. However, complexity in tax collection, the 5% levy on digital transactions with foreign vendors, and additional taxes charged by payment intermediaries risk increasing costs and discouraging digital adoption.”
Industry representatives pointed out a critical missed opportunity in the budget: the failure to mandate digital payment options across retail. Many major retailers continue to refuse digital payments, to facilitate income concealment and tax evasion. This supports the informal economy and hinders efforts to bring more transactions into a documented system.
The Pakistan Software Houses Association (P@SHA) voiced strong disappointment. It warned that the budget’s neglect of key IT sector demands and the introduction of inconsistent tax policies could restrict export growth, jeopardize jobs, and send a negative signal to global investors. P@SHA emphasized that the lack of a defined and fair taxation framework for remote workers and tech exporters was required.
The Overseas Investors Chamber of Commerce and Industry (OICCI) also criticized the government for missing a vital chance to broaden the tax base. They said that the opportunity should’ve been cashed to document Pakistan’s vast Rs9 trillion cash-based informal economy. While acknowledging positive steps like the nationwide rollout of e-invoicing and expansion of Point of Sale (POS) systems, OICCI stressed the absence of a concrete strategy to address the informal sector and rationalize tax structures.
The new Finance Bill introduces a tiered tax structure for local digital payments, ranging from 1% to 2% depending on the transaction amount. Furthermore, a 5% tax will be levied on goods purchased from foreign online marketplaces like AliExpress and Amazon, to be collected by banks and payment gateways at the point of transaction. Courier companies will also be tasked with collecting taxes on cash-on-delivery payments. Banks and courier services have been designated as withholding agents, responsible for collecting and remitting these taxes and filing detailed statements on all digital transactions. Online marketplaces are now required to ensure all vendors are registered for sales tax, aiming to tighten compliance across the sector.
Aamir Ibrahim acknowledged the government’s intention to bring more online activity into the formal economy. “We need to strike a balance between expanding the tax net and fostering digital inclusion. If digital transactions become more expensive or cumbersome, we risk undermining the very progress we’ve made in financial inclusion and digital transformation,” he stated.
He urged policymakers to re-evaluate the proposed levies and streamline tax collection to ensure Pakistan’s vision of a cashless, digitally empowered society remains achievable. “There is still time to fix anomalies in the new budget. Let’s make sure that our policies truly support a digital Pakistan, rather than create new barriers to adoption.
