ISLAMABAD

The Pakistan Software Houses Association has urged the federal government to extend the country’s 0.25% Final Tax Regime (FTR) on IT export receipts for another 10 years, warning that policy uncertainty could slow investment and weaken Pakistan’s digital economy ambitions.

In its latest appeal to the Ministry of Finance and the Federal Board of Revenue, P@SHA said the current tax regime under Section 154A is set to expire in June 2026, creating serious concerns for technology firms planning long-term expansion and international contracts.

P@SHA Chairman Sajjad Syed said predictable taxation policies remain critical for Pakistan’s IT and IT-enabled services sector, particularly as companies compete for global outsourcing projects and foreign investment.

The association noted that Pakistan’s IT exports reached a record $3.8 billion in FY2024-25, reflecting 18% annual growth under the current tax framework.

However, P@SHA warned that Pakistan still remains significantly behind regional competitors such as India, whose technology sector generated more than $224 billion in exports during the same fiscal year.

According to the association, long-term fiscal stability is essential for attracting major investments in technology infrastructure including data centers, cloud services and Global Capability Centers (GCCs), projects that often require seven to ten years for investment recovery.

P@SHA argued that several regional economies already offer long-duration technology incentives, citing India’s Special Economic Zone benefits, Vietnam’s extended IT incentives and Bangladesh’s corporate tax exemptions for the technology sector.

Industry officials believe Pakistan risks losing competitiveness if uncertainty surrounding the tax regime discourages international clients and multinational technology companies from committing to long-term operations in the country.

The association also linked the proposed extension to the government’s stated goal of increasing Pakistan’s IT exports to $15 billion by 2030, saying such growth targets would require sustained annual expansion of 25% to 30%.

P@SHA warned that allowing the current tax framework to expire could reduce export activity and foreign exchange inflows rather than increase tax revenues.

Technology sector analysts say the debate highlights the growing importance of policy consistency as Pakistan attempts to position itself as a regional technology and outsourcing destination.

The proposed extension is expected to become a key issue in upcoming federal budget discussions as the government balances revenue targets with efforts to accelerate digital economy growth and attract foreign investment into Pakistan’s expanding IT sector.