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The Asian Development Bank (ADB) has cautioned Pakistan that its steep and inconsistent taxes on digital infrastructure pose a serious risk to foreign investment, growth, and the expansion of critical digital services.
In its latest report on Pakistan’s Digital Ecosystem, the ADB pointed out that both federal and provincial taxes on telecom and digital services are among the highest in the region and globally. The Bank warned these heavy taxes, coupled with unpredictable policies, could discourage investment at a time when Pakistan needs digital transformation to drive overall economic growth.
The ADB also flagged inefficient and costly spectrum allocation processes, urging Pakistan to rationalize spectrum floor prices and de-link them from the US dollar to give operators more stability. It recommended fixing tax rates for at least 10 years to provide a predictable environment for investors.
According to the report, the analog processes of tax authorities in Pakistan add hidden compliance burdens on businesses. This raises costs further, widening the digital divide — especially for women and marginalized communities who already face cultural and economic barriers to accessing the internet.
The Bank stressed that Pakistan needs to establish a clear, long-term policy framework that supports private investment in digital infrastructure. This includes offering fair, country-wide right-of-way fees, early catalytic investments in digital projects, and reforms to the Universal Service Fund (USF) to target unserved areas.
ADB also encouraged provincial governments to stimulate demand by connecting schools and hospitals to fiber internet, which would help internet service providers justify expanding networks to more households and businesses.
Highlighting the role of telecom as an enabler for all other sectors, the ADB noted that Pakistan must address these tax and regulatory hurdles urgently to unlock growth, attract new investment, and create jobs across the economy.
