IT Sector Dissatisfied with Mixed Bag of Budget Despite Increased Spending

The IT sector’s dissatisfaction with the federal budget is a recurring theme every June. Despite increased spending, concerns abound. The Ministry of Information Technology & Telecommunications saw its budget rise to Rs40.1 billion for FY25, a significant increase. Additionally, Rs28.9 billion was allocated for development expenditure, and initiatives like the National Digital Commission and Pakistan Digital Authority were announced.

However, the budget's details left the IT sector wanting. The general sales tax on IT hardware was increased from 5% to 10%, impacting an industry already struggling with outdated technology and high costs due to devaluation. Data Darbar analysis revealed that prices of imported laptops and personal computers have soared by 179% and 162%, respectively, between FY19 and FY23, outpacing the consumer price index increase of 84%.

The Pakistan Software House Association (P@SHA) highlighted the widening gap between the industry’s needs and government provisions. Their recommendations for a maximum 5% income tax rate for employees of registered companies and raising dollar retention for exporters to 100% were ignored. P@SHA Chairman Zohaib Khan expressed dissatisfaction, noting that none of their demands were met.

The skilled professionals in the sector are increasingly discontent, choosing either to work quietly or leave the country. The government’s failure to address these issues is exacerbating the talent drain, with professionals moving to countries where their skills are valued and their income remains stable. Export-oriented companies are parking revenues abroad, and local firms are seeking opportunities overseas, leading to a growing parallel economy. This situation threatens to undermine the sector's potential and the government's tax base.