The Federal Board of Revenue (FBR) has introduced a new policy to tax online sellers operating from home, sparking resistance from freelancers, digital entrepreneurs, and e-commerce stakeholders. The move is part of the federal budget 2025–26 and aims to broaden the tax base by bringing digital businesses into the formal system.
According to officials, the policy includes an 18 percent sales tax on e-commerce transactions carried out through platforms such as Daraz and Foodpanda, effective from July 1, subject to parliamentary approval. In addition, a 3.5 percent tax will apply to income earned from freelancing and digital work, with the government expecting to generate around Rs 52.5 billion in additional revenue.
Online sellers will be required to register with the FBR, while platforms and delivery services will be barred from working with unregistered businesses. Penalties of up to Rs 1 million have also been proposed for non-compliance.
The policy comes at a time when Pakistan’s online economy is rapidly expanding. Freelancing remittances surged from $1.33 billion in FY 2022–23 to $3.223 billion in FY 2023–24, while overall IT, ITeS, and freelance exports rose to $3.8 billion in FY 2024–25. Pakistan’s freelancing industry currently generates more than half a billion dollars annually and could grow to $2.4 billion within the next five years if the upward trend continues.
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The country’s e-commerce market is also showing strong growth. In 2023, online retail generated about $5.2 billion in revenue. Projections estimate that the sector will grow to $5.91 billion in 2025 and reach $6.7 billion by 2029, with a compound annual growth rate of nearly 6 percent.
Despite this growth, stakeholders argue that blanket taxation risks discouraging small-scale sellers and freelancers. The Pakistan Freelancers Association (PAFLA) has warned that taxing all freelancers equally, without considering income levels, will particularly hurt students, educators, and low-income workers who depend on online work. Industry experts suggest a tiered tax structure that distinguishes between large e-commerce platforms and small home-based sellers, while also offering tax relief and incentives to nurture entrepreneurship.
Analysts believe that while taxation is necessary to expand Pakistan’s revenue base, the government must balance regulation with support. Without adjustments, they warn that the policy could slow digital growth and undermine opportunities for thousands of Pakistanis who rely on online businesses for their livelihood.
