By Omer Mubeen, Chairman – Pakistan eCommerce Association (PEA)
The eCommerce sector in Pakistan—once a beacon of hope for digital transformation, entrepreneurship, and job creation—is facing an unprecedented crisis. The recent surge in government taxes is crippling small and medium enterprises (SMEs) and discouraging digital entrepreneurs, many of whom were the driving force behind the country’s online business growth. If these policies continue unchecked, Pakistan risks losing a vital engine for economic revival and foreign exchange earnings.
The Emerging eCommerce Market Under Pressure
Pakistan’s eCommerce industry has grown steadily at 20-25% annually and was valued at approximately USD 7 billion (FY 2024), according to official data. With nearly 70% of the ecosystem powered by SMEs, this sector thrives on affordable digital marketing tools, competitive logistics solutions, and accessible online marketplaces.
However, the sector is now under immense pressure due to multiple compounding factors:
- High Marketing Costs:
With the rising USD to PKR rates, digital advertising on Meta, Google, and TikTok has become 40-50% more expensive compared to last year, squeezing already thin marketing budgets. - Increased Product Costs:
Imported goods and raw materials now carry heavy custom duties and taxes, raising the cost of goods sold (COGS) by 15-20%, which affects both retailers and eCommerce sellers. - Logistics & Courier Challenges:
Delivery costs, COD return rates (up to 40%), and high last-mile expenses reduce profit margins. SMEs cannot absorb these rising costs without increasing product prices. - New Government Taxes:
These regressive tax policies are eroding profitability, forcing many online sellers to shut down before even reaching breakeven.
Combined, these pressures are shrinking profit margins, driving hundreds of small online stores to closure over the past six months and causing significant job losses in the digital economy.
Impact on SMEs and Women Entrepreneurs
The eCommerce taxation policies disproportionately hurt SMEs and women-led businesses:
- Women in rural and underserved areas rely heavily on online selling platforms to overcome mobility, education, and resource constraints.
- For many, eCommerce was the only path to financial independence, but higher taxes and reduced demand are discouraging them.
- Recent estimates show 30% of women-led micro-enterprises have either downsized or shut operations in the last quarter.
If inclusive digital entrepreneurship declines, Pakistan risks reversing years of progress in female workforce participation and rural digital inclusion.
The Bigger Picture: Brain Drain and Shrinking Consumer Power
The domino effect of rising costs and taxes is far-reaching:
- SMEs and freelancers are relocating operations overseas, creating a brain drain and capital outflow.
- Informal grey markets are growing as businesses try to avoid excessive taxation, weakening the formal economy.
- Consumers face price hikes, lowering their buying power, and pushing many back to traditional retail, which undermines eCommerce adoption in Pakistan.
Currently, eCommerce directly or indirectly employs over 500,000 people. If the current trend persists, large-scale job losses and reduced digital exports are inevitable.
Policy Makers Must Rethink Their Strategy
The critical question: Are these tax policies strengthening Pakistan’s economy or crippling its digital future?
Globally, eCommerce contributes significantly to GDP growth, and with the right policies, Pakistan’s eCommerce sector could contribute up to 4% of GDP. Instead of supportive measures, the government’s tax burden is stifling innovation and scalability.
The Pakistan eCommerce Association (PEA) urges the government to:
- Revisit new tax policies and provide relief for SMEs.
- Create specialized incentives for women entrepreneurs and rural sellers.
- Lower entry barriers to encourage formalization instead of driving sellers into informal channels.
- Engage industry stakeholders in policy-making discussions before implementing measures that directly impact digital trade.
PDEMA: Strengthening Pakistan’s Digital Economy
The Pakistan Digital Entrepreneurs & Marketing Association (PDEMA) is a non-profit industry association working to advance Pakistan’s digital economy. Its core mandate includes policy advocacy, digital skills training, women-led entrepreneurship, logistics enablement, and taxation reform.
Key Impact Areas
- Digital Marketing & E-Commerce Enablement
- Offers SEO, SEM, content marketing, and performance marketing certifications.
- Advocates for fair seller policies and marketplace protection.
- Women Entrepreneurship & Inclusion
- Delivers community-based training programs in rural areas.
- Works with policy stakeholders to improve female participation in digital trade.
- Logistics & Cross-Border E-Commerce
- Liaises with logistics providers to make last-mile delivery affordable.
- Supports cross-border sellers via Pakistan Single Window (PSW) and international shipping solutions.
- Policy & Taxation Reform
- Engages with FBR, SECP, MoITT, and PITB for digital-friendly tax policies.
- Publishes whitepapers and policy recommendations to reduce barriers for SMEs and exporters.
- Export Enablement & Foreign Exchange Growth
- Trains sellers for Amazon, Shopify, Etsy, and Daraz Global.
- Supports cross-border remittances and compliance, increasing USD and GBP inflows.
A Call for Government Support
Omer Mubeen, Chairman of PEA, emphasizes:
“Without immediate action, we risk losing not only digital businesses but also the trust of thousands of entrepreneurs who believed in Pakistan’s eCommerce potential.”
If Pakistan’s government embraces tax reforms, SME relief, and digital enablement, the eCommerce sector could become a powerful engine for economic revival, export growth, and job creation. But without supportive policies, the future of eCommerce in Pakistan—and its promise of a digitally empowered economy—remains in jeopardy.