Pakistan’s 2025–26 federal budget marks a significant policy shift, particularly in how the government perceives and regulates the digital and startup economy. The introduction of the Digital Presence Proceeds Tax Act, 2025 and associated changes in e-commerce taxation have sparked varied responses from the startup ecosystem, highlighting a growing government intent to formalize and bring transparency to the digital sector.
One of the most notable developments is the 5% digital transactions proceeds levy, which will be applied to payments made to both domestic and international digital vendors. Alongside this is an 18% e-commerce tax, designed to capture revenue from platforms facilitating the sale of goods and services online. For the first time, the government has provided a formal definition of “e-commerce,” and expanded the concept of “online marketplace” to include any taxable activities conducted via digital channels such as websites and mobile applications.
This has prompted mixed reactions from Pakistan’s startup community. Mutaher Khan, co-founder of Data Darbar, noted that the tax regime appears to misunderstand how digital marketplaces earn revenue. He explained that the tax is being applied based on gross merchandise value, not on actual income, leading to a disconnect between tax obligations and true earnings. He also expressed concern over the government’s outsourcing of tax collection to banks and courier companies — the latter of which have never performed such tasks before, and may face considerable operational challenges.
In contrast, Hanzala Raja, founder and CEO of beauty-tech startup Highfy, welcomed the changes. He viewed the move as an important step toward formalizing the digital sector and reducing bureaucratic obstacles for small businesses. Raja believes that recognizing e-commerce and digital trade as taxable segments shows the government is finally taking the digital economy seriously, which could lead to more effective and tailored policies in the future.
Raja also emphasized that platforms like his, which partner with numerous brands, face delays and complications from unclear regulations. He argued that a unified taxation policy and streamlined processes could help build trust and unlock long-term value across Pakistan’s tech ecosystem. Still, he added that to truly empower startups, the government must go further—simplifying tax rules for early-stage businesses and expanding access to financing, especially beyond major urban centers.
Adnan Ali, CEO of PayFast, offered a broader perspective, pointing out that the taxation of digital platforms will likely raise consumer prices across streaming, e-commerce, and cloud services. Nevertheless, he acknowledged the reform’s potential to increase fairness by capturing revenues previously outside the FBR’s reach. However, he warned that enforcement may prove difficult, especially since many global platforms do not use local payment gateways, creating gaps in visibility.
For others, the conversation around digital taxes is just one part of a larger concern. Nauman Sikandar Mirza, founder of customer engagement startup Mergn and former CEO of foodpanda Pakistan, argued that the budget failed to address one of the most pressing issues for startups: the heavy tax burden on salaried employees. He expressed disappointment that the budget did not provide relief for employees or tech companies operating in tough economic conditions.
Adnan Siddiquie, COO of health tech company EZShifa, emphasized the importance of stability and consistency in policy for attracting investors. He noted that while the current measures may reflect the government doing its best within limited resources, lasting support for startups will depend more on long-term continuity and security than on individual budget announcements.
Collectively, these perspectives underline a clear shift in how Pakistan’s government is approaching the digital economy. The 2025 budget is more than just a tax reform—it is a signal that the state is beginning to formally integrate the digital and startup sectors into its broader economic strategy. Whether this leads to growth or new burdens will depend on the effectiveness of policy implementation and ongoing engagement with the private sector.
