The federal government's Budget 2025-26 is disappointing for Pakistan's digital economy, especially for e-commerce businesses. The government applied 18% general sales tax (GST) on e-commerce platforms, which courier companies have to collect and submit to the authorities. The finance minister, Muhammad Aurangzeb, justified this step by saying that the rapid growth of online businesses and digital marketplaces was creating problems for traditional businesses. His remarks on the digital economy seem to have no grounding in reality and are baseless.
Online or e-commerce businesses in Pakistan flourished after COVID-19 when many traditional businesses moved online to survive. It was the first time that people realized the importance of online businesses and found a way to connect with their customers within the country as well as abroad.
E-commerce has emerged as one of the most accessible and convenient platforms for economic participation, especially for small business owners, women-led enterprises, and start-ups. I know a few businesses in interior Sindh that are offering traditional products online despite having no courier facilities in their home villages. The proprietors travel a few miles to the courier office to send the parcels to the customers.
Online businesses have allowed many individuals to build incomes with minimal investment, offering products and services through social media channels, websites and different marketplaces. These businesses require comparatively fewer physical resources as compared to the traditional retail outlets. Instead of facilitation, taxing this sector is not only regressive, it is a damage to the very people trying to adapt and survive in a difficult situation.
Governments across the globe are supporting and streamlining digital entrepreneurship to bring about economic growth. Malaysia and Indonesia provide grants and tax relief for start-ups. Bangladesh, a country with recent economic challenges, has rolled out subsidized training programs and logistics support to boost its digital economy. England offers great support to small businesses. Recently, the government there raised the annual tax-free trading allowance to survive initial financial problems. The UK government provides relief measures for small businesses with income ranging from £1,000 to £3,000, easing the regulatory and financial burden on small sellers operating through platforms such as Etsy, Vinted, eBay, and others.
The world is moving toward enabling digital ecosystems, but we, on the other hand, are apparently bent upon slowing down progress in the digital landscape. Rather than educating and supporting traditional businesses to go digital, the government has instead opted to punish all those dreaming big. The growth of one sector is being seen as a threat rather than an opportunity to elevate the entire market.
This mindset assumes a zero-sum game, but in reality, digital and traditional models can, and should, coexist with proper regulation, fair competition, and innovation-friendly policies.
It is, unfortunately, far easier to impose taxes on an evolving sector than to reform tax generation systems. Instead of developing and improving the tax mechanism or closing loopholes exploited by entrenched players, the government has once again chosen the path of least resistance.
The GST on e-commerce and logistics network must be withdrawn. The government must introduce simplified business norms for small online sellers. It must also invest in building digital infrastructure, support logistics efficiency, and offer incentives for people to formalize their online businesses. Additionally, training programs and micro-financing support should be extended to youth and women entering this digital business space.
We need to re-visit the digital commerce policies not as a challenge to tradition but as a necessary step toward economic resilience and reform. Taxing it at this crucial stage disappoints entrepreneurs, small investors, and consumers. If government continues to punish digital economy, we will be left behind, while the rest of the region will move forward.
