Pakistan govt’s budget steps may hinder cashless economy drive: TOAP

ISLAMABAD: As the government unveils a raft of new taxes on digital transactions and e-commerce in the federal budget, Aamir Ibrahim, chairman Telecom Operators Association of Pakistan voiced both hope and concern, warning that the measures could slow Pakistan’s journey toward a cashless economy.

Industry leaders, trade bodies, and associations also expressed concerns that the budget missed an important opportunity to mandate digital payment options across retail. They pointed out that many major retailers still refuse to accept digital payments in order to hide real income and evade taxes, indicating that enforcement against such practices remains insufficient. This gap, they argued, allows tax evasion to persist and undermines efforts to bring more transactions into the formal, documented economy.

The Overseas Investors Chamber of Commerce and Industry (OICCI) also criticised the government for missing a crucial opportunity to broaden the tax base and document the country’s vast Rs9 trillion cash-based informal economy. In a statement, the OICCI noted that while measures like the nationwide rollout of e-invoicing and expansion of POS systems are positive steps; the absence of a concrete strategy to address the informal sector and rationalise tax structures undermines efforts to create a more investment-friendly environment and advance economic formalisation.

“The budget aims to formalise online trade through digital integration and tax measures, which is a plus,” said Aamir. “However, complexity in tax collection, the 5% levy on digital transactions with foreign vendors, and additional taxes charged by payment intermediaries risk increasing costs and discouraging digital adoption. Making digital payments more prevalent, easier, and affordable is essential for Pakistan’s growth and for documenting the economy. Let’s ensure policies support a truly digital Pakistan, driving transparency and compliance without undue burdens.”

The new Finance Bill introduces taxes on both local and foreign e-commerce marketplaces, making online shopping costlier for Pakistani consumers. Notably, a five per cent tax will be imposed on goods purchased from foreign online marketplaces such as AliExpress and Amazon, collected by banks and payment gateways at the point of transaction. Meanwhile, local digital payments will face a tiered tax structure, ranging from one per cent to two per cent depending on the transaction amount, and courier companies will collect taxes on cash-on-delivery payments.

Banks and courier services have been designated as withholding agents, required to collect and remit these taxes, and file detailed statements on all digital transactions. Online marketplaces must also ensure that all vendors are registered for sales tax, tightening compliance across the sector.

Aamir acknowledged the government’s intent to bring more online activity into the formal economy but cautioned that the added complexity and cost could push some businesses and consumers back toward cash and informal channels. “We need to strike a balance between expanding the tax net and fostering digital inclusion. If digital transactions become more expensive or cumbersome, we risk undermining the very progress we’ve made in financial inclusion and digital transformation.”

He urged policymakers to revisit the proposed levies and streamline tax collection, so that Pakistan’s vision of a cashless, digitally empowered society remains within reach. “There is still time to fix anomalies in the new budget. Let’s make sure that our policies truly support a digital Pakistan, rather than create new barriers to adoption.”

Copyright Business Recorder, 2025