Pakistan Retailers Back New E-Commerce Taxes to Counter Foreign Competition
KARACHI – Pakistan’s recent decision to impose new taxes on foreign e-commerce platforms such as Temu, Shein, and AliExpress is being welcomed by local retailers, who have long struggled against the competitive advantage of tax-exempt imports. Under the new measures introduced in the federal budget passed on June 26, foreign platforms will now face an 18% sales tax on goods delivered by courier companies, a 5% fixed income tax on digital retailers, and a reduction in the duty-free threshold for imported parcels from Rs 5,000 to Rs 500 ($18 to $1.80). These measures came into effect on July 1, 2025.
The new tax regime, supported by local retailers, aims to level the playing field between international giants and Pakistan’s domestic businesses. Malik Asim Dogar, Secretary-General of the Chainstore Association of Pakistan (CAP), praised the government’s move, stating that bringing international platforms into the tax net will relieve domestic businesses from the pressure of competing with cheaper, tax-free imports.
Prime Minister Shehbaz Sharif’s administration has set an ambitious goal to raise over Rs 14 trillion ($49.3 billion) in taxes this fiscal year, partly to meet targets under the International Monetary Fund’s $7 billion loan program. For years, foreign e-commerce platforms were operating in Pakistan without paying taxes, undercutting the prices of formal retail chains like Imtiaz, Chase Up, and Naheed, who already face up to 25% in taxes.
According to CAP, foreign platforms have seen an explosive surge in parcel volumes, rising from about 1,000 per day in 2023 to a staggering 20,000 to 30,000 per day this year. This 2,900% increase in imports has directly affected local businesses, particularly in categories such as crockery, home goods, small electronics, and casual clothing, with some reporting sales declines of up to 10% in the last six months.
The new tax policy is being hailed as a necessary step toward providing domestic sellers with a fairer playing field. Shankar Talreja, Head of Research at Topline Securities, acknowledged that the tax measures address a longstanding grievance of local retailers who were at a disadvantage due to the lack of regulation on foreign imports. However, Talreja also noted that despite the rapid growth of e-commerce in Pakistan, with over 80% teledensity, the retail market still remains small, with online shopping accounting for less than 1% of the total market.
While the new tax laws have been met with cautious optimism, local retailers express concerns over enforcement. Salman Bashir, CEO of Chase Up, one of Pakistan’s largest retail chains, questioned the feasibility of proper implementation, citing previous instances where tax measures were passed but not effectively enforced. Dogar and Talreja echoed these concerns, particularly regarding the responsibility placed on courier companies and financial institutions to collect taxes. Courier companies, which are not designed to handle tax collection, may face operational challenges, and their motivation to comply may diminish if the administrative burden is too heavy.
As Pakistan continues to push for digital transformation in retail, stakeholders are hopeful that these new tax measures will help domestic retailers thrive in an increasingly digital marketplace, though the success of the policy will ultimately depend on effective enforcement and coordination between government agencies and logistics firms.
