Pakistan has repealed a 5% tax on foreign digital companies on the request of the United States in a bid to strengthen bilateral trade ties, with retrospective effect from July 1, 2025.
The Digital Presence Proceeds Tax, 2025, set to take effect from July 1, targeted services and goods ordered online from abroad. The tax had made online shopping costlier for Pakistani customers, and the government had also added taxes on goods purchased online from outside Pakistan.
The decision, approved by the federal cabinet, addresses U.S. concerns that the tax created an unfair barrier for major tech firms like Google, Amazon, and Meta. The repeal is seen as a confidence-building measure during trade talks led by Finance Minister Muhammad Aurangzeb and the U.S. trade secretary.
The repeal should also benefit online vendors such as AliExpress and Temu, which had significantly raised prices for Pakistani consumers in recent weeks. Under the legislation, Customs was empowered to ensure that goods purchased online from foreign marketplaces were not delivered to customers unless courier companies provided evidence of tax payment.
The move follows earlier tensions, including President Trump’s imposition of a 29% tariff on Pakistani exports in April. With the tax now withdrawn, the U.S. is expected to lower tariffs by up to 15% on key Pakistani exports, providing a potential boost for sectors like textiles and apparel.
Analysts view the rollback as a strategic step by Pakistan to attract investment, restore market confidence, and secure better access to the U.S. market.