Pakistan’s Digital Boom Now in Tax Crosshairs: 5M+ Earners to Pay Up

Islamabad – Pakistan’s National Assembly Standing Committee on Finance is advancing a key clause in the Finance Bill 2025-26, proposing to tax online businesses that earn over PKR 5 million annually. During intensive clause-by-clause scrutiny, lawmakers focused on expanding tax coverage for e-commerce operators and digital service providers. These discussions reflect rising government revenue ambitions and large-scale shifts in Pakistan’s digital economy.

The decision follows a trend in which Pakistan aims to broaden its tax base, as Finance Minister Muhammad Aurangzeb specified the government’s push for a PKR 14.13 trillion revenue goal while introducing the Digital Presence Proceeds Tax Act targeting foreign e-commerce as well.

Taxes for Women And Small Entrepreneurs Under Scrutiny

Committee members, including Sharmila Faruqi, highlighted the growing participation of women and lower-income groups in home-based online businesses. Faruqi noted, “Many women are running online businesses from their homes” and pointed out that the middle and poorer classes rely heavily on these earnings. Meanwhile, Mirza Ikhtiar Baig urged that regulators allow this economy to flourish.

In response, FBR Chairman Rashid Langrial assured legislators that income thresholds will still apply. He confirmed that anyone earning below the PKR 5 million mark, or the previously announced PKR 1.2 million for small sellers, will remain exempt even if registered. “If someone earns less than the set threshold, even if registered, they won’t have to pay anything,” he explained.

Government Sees Major Gains, Industry Calls For Reform

The FBR anticipates this new structure will raise approximately PKR 65 billion, combining income and sales taxes on e-commerce and foreign digital platforms. Under the draft law, domestic digital sales will face income tax, while goods sold via online markets or cash-on-delivery channels will see a Sales Tax Withholding regime ranging from 0.25 to 2 percent, depending on transaction value.

However, Pakistan’s online industry voiced strong concerns. At a Karachi Press Club event, representatives from the Chainstore Association and Pakistan E-Commerce Association cautioned that the complex compliance framework, including multiple withholding rates, mandatory registration, and hefty penalties, could burden over 100,000 small vendors and disrupt the growth of micro-businesses, particularly those run by women and youth.

They urged the government to implement phased rollouts and engage platforms, couriers, and payment providers in shaping a consensus-based policy.

Political And Legislative Balance Under A Tax System

In parallel, the Senate Finance Committee pushed back on earlier proposals to tax individuals earning PKR 1.2 million, recommending a zero-rated tax up to that amount and rejecting taxes on casual online sellers.

Despite differences, both parliamentary houses appear aligned on the broader aim: to bring e-commerce and digital services within the tax system while protecting low-income participants.

What remains to be decided is how state agencies will balance revenue expansion against protecting the micro-entrepreneur class that forms the backbone of Pakistan’s emerging digital economy.