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ADB Urges 5% Uniform GST to Boost Pakistan’s Digital Economy
ADB urges Pakistan to impose a flat 5% GST on digital transactions to spur e-commerce & investments. Warns high taxes, policy gaps threaten growth & digital access.
ND
by News Desk
2025-07-15
ADB Urges 5% Uniform GST to Boost Pakistan’s Digital Economy

The Asian Development Bank (ADB) has recommended that Pakistan implement a uniform 5% general sales tax (GST) on all digital transactions to promote e-commerce, expand digital payments, and help reduce reliance on cash in the economy.

In its newly released report on Pakistan’s Digital Ecosystem, the ADB raised serious concerns over steep and inconsistent taxation on digital infrastructure, cautioning that such policies pose significant threats to foreign investment, sectoral growth, and the wider adoption of digital services.

“Taxes on this sector, both federal and provincial, are among the highest globally and regionally,” the report stated. “Inconsistent policies have created an unstable business environment, deterring much-needed investment.”

Pakistan’s telecom sector, the backbone of digital infrastructure, has witnessed declining revenues and reduced foreign investment. The ADB attributed this downturn to high taxation, regulatory hurdles, and a burdensome “Right of Way” (RoW) process — the system that allows telecom companies to install infrastructure like fiber optic cables.

The report noted that Pakistan’s broadband penetration stands at 56.5%, with 137 million subscriptions, but regressive provincial sales taxes — as high as 19.5% on internet services — have made digital access unaffordable for many, especially women and marginalized groups.

Highlighting the impact, the ADB said, “The high cost of service provision exacerbates the digital divide and discourages innovation.”

To remedy the situation, the ADB recommended:

·       Implementing a uniform 5% GST across all digital transactions nationwide

·       Rationalising all digital infrastructure taxes for competitiveness with peer economies

·       Locking tax rates for the next 10 years to ensure stability

·       Introducing a flat, countrywide RoW fee per meter with predictable annual adjustments

·       Promoting local smartphone manufacturing, offering 3% R&D allowances on exports

·       Prioritising early-stage investments in digital infrastructure

·       Expanding internet access and affordable device ownership, especially for women

·       Creating a robust legal framework for PPPs (Public-Private Partnerships)

The report warned that Pakistan has the world’s lowest average revenue per user (ARPU) due to intense competition among service providers, shrinking the profit margins of telecom companies and making the sector unsustainable in its current form.

The ADB emphasized that an overhaul in digital tax and regulatory policy — in consultation with industry players — is essential to modernize Pakistan’s digital economy and bridge the growing digital divide.

 
Tagged:

Ecommerce

DigitalPakistan

ADBReport

GSTReform

TechTax
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