Pakistan Digital Presence Proceeds Tax Raises Alarms for Foreign Investors

The Asia Internet Coalition (AIC) has voiced serious concerns over Pakistan’s proposed Digital Presence Proceeds Tax (DPPT), introduced through the Finance Bill on June 10 in the National Assembly. The coalition warned that this move could discourage foreign investment, create tax uncertainty, and conflict with international tax agreements.

In a detailed statement, the AIC noted that like other digital services taxes (DSTs), the proposed Pakistan Digital Presence Proceeds Tax is a unilateral and discriminatory measure aimed primarily at taxing foreign digital companies. The coalition argued that this approach is inconsistent with established international tax norms and undermines the principles laid out in Pakistan’s Double Taxation Avoidance Agreements with other nations.

The AIC highlighted that the DPPT would likely lead to double or even multiple taxation of the same income, as foreign companies would struggle to secure matching tax credits in their home countries. “Such measures disproportionately impact foreign businesses, erode investor confidence, and introduce significant tax uncertainty in Pakistan,” the coalition emphasized.

Impact on Global Tax Coordination

The coalition also pointed out that Pakistan is currently part of the OECD/G20 Inclusive Framework on BEPS, alongside over 140 jurisdictions working to develop coordinated international tax rules. This framework aims to phase out unilateral DSTs and instead establish a fair system of income taxation that avoids double taxing specific sectors or narrowly defined services.

Pakistan’s decision to push forward with the DPPT while these multilateral discussions continue risks undermining the global consensus. The AIC drew attention to recent steps taken by other countries to retract similar unilateral taxes—India withdrew its 6% Equalisation Levy effective April 2025, and New Zealand dropped its DST bill in May.

The coalition urged Pakistan’s government to reconsider its approach and initiate a transparent, inclusive consultation process with key stakeholders, including industry representatives, civil society groups, and the general public. “Before enacting a potentially harmful and destabilizing law, Pakistan must engage openly with all impacted parties,” the AIC stressed.