Pakistan eyes taxing online shopping to increase revenue

ISLAMABAD: Pakistan is exploring new ways to tax the fast-growing e-commerce sector as part of its upcoming 2025–26 budget, aiming to bring online retail into the formal economy and boost much-needed revenue, according to officials.

Online shopping has become increasingly popular, especially among middle and upper-income households in big cities. Yet, most of this activity remains outside the tax net. The Federal Board of Revenue (FBR) is now weighing several proposals to change that.

According to Geo News, one plan under consideration would allow delivery companies to deduct a 3 per cent sales tax on cash-on-delivery purchases, effectively collecting it on behalf of the government. Separately, manufacturers would be required to include a 15 per cent general sales tax in the product price.

The timing of the move coincides with Pakistan’s ongoing virtual talks with the International Monetary Fund, which resume Wednesday. The government is under pressure to cut spending and raise revenue in order to meet the IMF’s budget deficit target of 5.1 per cent of GDP for the next fiscal year.

Efforts to tax traditional retail have largely fallen short, with the government’s recent Tajir Dost Scheme failing to bring most small shopkeepers into the system. Now, officials see e-commerce as a more accessible — and growing — source of revenue.

The FBR is also considering new taxes on domestic purchases made with debit and credit cards. Currently, a federal excise duty only applies to international card payments, leaving local spending untouched.

Officials say an internal study points to strong potential for tax collection from the digital economy. They’re also discussing legal changes that would make it compulsory for online platforms — even those that don’t hold inventory — to collect and deposit taxes.

Still, tax experts warn that rushing into this could hurt a sector still finding its footing. But policymakers argue that delaying action could make it harder to regulate down the road.

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