The IT sector in Pakistan is facing a major setback due to the budget proposals for FY25, according to the Federation of Pakistan Chambers of Commerce and Industry (FPCCI). Atif Ikram Sheikh, the FPCCI chief, stated at a press conference that the budgetary proposals submitted by the IT industry have been completely ignored, despite repeated assurances from the government.

Sheikh expressed concerns that the new proposals, particularly the high taxation measures, will stifle growth and innovation in the informal technology sector and exacerbate brain drain. The Finance Bill for FY25 has revealed the finance division’s “short-sightedness vis-à-vis the IT industry”, and there are apprehensions that these proposals will “derail the IT sector”.

The Pakistan Software Houses Association (PSHA) has also voiced its concerns over the past 10 days, with its chairman, M. Zohaib Khan, arguing that the remote worker tax regime undermines the government’s revenue targets. Khan stated that none of PSHA’s budget proposals have been met, and the skilled salaried class is now burdened with higher income tax, which could lead to a brain drain of talent.

The budget proposals have increased the tax liability for all persons earning more than Rs50,000 per month, with the highest impact on those earning Rs6 million or more per year. Interestingly, the tax increase for salaried persons earning up to Rs12 million per year is also Rs22,500.

While the government has allocated Rs79 billion primarily for government projects and IT parks, the IT industry has not received any payroll incentives to address remote worker issues, which is hindering growth. Additionally, the General Sales Tax on IT hardware has been increased from 5% to 10%, which will also hurt efforts towards digitalization.

Zohaib Khan emphasized that the current budget does not reflect the promise repeatedly made by the government, and the IT industry will reach out to authorities to seek clarification and necessary amendments to ensure Pakistan’s IT sector continues on its growth trajectory.