The Pakistan IT Industry Association has warned that companies are misusing the freelancer tax system, creating distortions in Pakistan’s digital economy before Budget 2026-27.
P@SHA said the federal government must separate genuine project-based freelancers from full-time remote employees who work for foreign companies on fixed salaries.
The association said blurred definitions have enabled tax arbitrage. It said some IT companies use the freelancer framework to reduce tax liabilities.
P@SHA said the trend also inflates Pakistan’s freelance earnings data. As a result, it distorts tax records and affects genuine freelancers.
Freelance earnings reached about $950 million during the first 10 months of the current fiscal year, according to the association’s budget proposals. The group said genuine freelancers should keep access to a facilitative tax environment. However, it also called for stronger documentation of the wider gig economy.
Read: Salaried Class Tax Hits Rs605.9bn Before Budget
P@SHA proposed a formal classification system for digital workers. Under the plan, independent freelancers would remain eligible for the simplified tax regime. Full-time remote professionals earning fixed salaries from foreign employers would be subject to the standard income tax slabs for salaried employment.
Global Freelancers Union Honorary President Tufail Ahmed Khan supported the distinction. He said authentic freelancers should continue to benefit from the 0.25% final tax regime. Khan also said remote professionals with fixed foreign salaries should pay tax under regular graduated salary slabs.
P@SHA Chairman Sajjad Syed said the reform would protect local IT companies and encourage documentation. He said structured taxation can also push individual contributors toward formal businesses.
P@SHA recommended continuation of the 0.25% final tax regime for IT exporters and authentic freelancers for 10 years. The association said policy stability would help attract global clients, support foreign-exchange inflows, and strengthen registered technology firms.
It also urged simpler banking processes, smoother remittance channels and easier tax filing. The group said these reforms can help freelancers scale into formal IT companies. P@SHA also called for national investment in artificial intelligence, cloud computing and cybersecurity.
