Experts warn against taxing freelancers, content creators

Pakistan's freelance community has voiced strong opposition to proposed taxation measures in the upcoming federal budget targeting freelancers and content creators—including YouTubers, vloggers, and TikTokers—urging the government to prioritise foreign exchange inflows and economic inclusion instead.

Pakistan Freelancers Association (PAFLA) Chairman Ibrahim Amin said the government must avoid creating an impression that a large number of content creators will be brought under the tax net, as this could discourage struggling freelancers and budding digital creators. However, he suggested that the Federal Board of Revenue (FBR) could consider taxing a select group of high-earning entertainment content creators with substantial followings and revenues. Amin urged the government to categorise content creators carefully, exempting those who provide educational content and skills training to millions of subscribers in Pakistan and abroad from any new tax burden.

He pointed out that both the public and private sectors have invested heavily in developing freelancers and digital creators, who have used these skills to support their families and attract much-needed foreign exchange into the country. Despite challenges such as frequent internet disruptions and electricity outages, freelancers' income surged to $400 million during the nine months of FY25, according to the latest Pakistan Economic Survey. Amin pointed out that most freelancers already pay taxes on every transaction and also bear deductions charged by freelancing platforms and payment gateways for transaction services.

Estimates suggest there are around 2.37 million freelancers in Pakistan, making it the fifth-largest freelance workforce globally.

"If we double the size of this community, annual foreign exchange inflows could exceed the $1 billion mark," said the PAFLA chief.

Hisham Sarwar, a social media influencer and a well-known digital skills and freelancing trainer, said the government must support the freelancing sector's efforts to bring foreign exchange into Pakistan rather than introduce measures that may create fear and discourage digital workers. Citing Bangladesh as an example, Sarwar noted that tax holidays and cashback incentives for its IT sector and freelancers have driven rapid growth. Pakistan, he argued, should strengthen its high-potential IT sector similarly to boost exports to $10 billion per annum.

Sarwar described Pakistan's freelancing market as limited but fast-growing, thanks to the talent and creativity of its youth. The rising adoption of artificial intelligence (AI) tools, he said, would likely attract more skilled individuals to the IT industry, potentially revolutionising the services and product sectors and delivering greater foreign exchange earnings than the proposed tax revenues.

He warned the government against imposing new taxes inspired by the lifestyles of a small fraction—less than 1%—of luxury-living vloggers. Such measures, he said, would harm the entire industry.

Pakistan Software Houses Association (P@SHA) Senior Vice Chairman Muhammad Umair Nizam said the IT sector has already proven its ability to attract valuable foreign exchange and foreign investment, aided by government incentives, tax holidays, and aggressive marketing drives.

Nizam stressed that expanding IT exports would help reduce the country's current account deficit while empowering the youth to improve their living standards through employment in the IT and freelancing sectors.

He also reiterated his call for an extension of the Final Tax Regime (FTR) for freelancers and IT exporters by up to 10 years and urged the government to allocate funds in the budget for capacity building of IT professionals and students.

During July-March FY2025, IT and Information Technology Enabled Services (ITeS) achieved a trade surplus of $2.429 million, a 21.6% increase from $1.997 million last year, despite frequent internet disruptions during the fiscal year.

The Pakistan Economic Survey 2024-25 highlighted other key indicators for the IT and telecommunications sector, including $2.825 million in IT exports, $2.429 million in trade surplus for IT and ITeS, $400 million in freelancers' remittances, Rs803 billion in telecom revenues, 147.2 million broadband subscribers, and a total of 199.9 million telecom subscribers.