Prices of products on online marketplaces like Temu and AliExpress have surged sharply in Pakistan after the government passed the recent budget.

Internet users across the country have noticed the dramatic increase, with many reporting that some items now cost three to four times more than before.

However, the three to four times price hike isn’t solely the result of newly introduced taxes.

Here’s what happened:

The government of Pakistan has implemented the Digital Presence Proceeds Tax Act, which imposes a 5 percent tax on goods sold in Pakistan by foreign sellers.

In addition to this 5 percent tax, the government now requires these online platforms and shopping stores to pay an 18 percent sales tax, just like all other businesses operating in Pakistan.

To put it into perspective, when a manufacturer in Pakistan sells a product, they pay 18 percent sales tax and 35 percent income tax. In contrast, foreign companies like Temu and AliExpress have been selling products in Pakistan without paying any taxes—a situation the new regulations will now change.

Are New Taxes to Blame for 300% Hike in Online Prices?

No, the taxes introduced in the budget cannot alone cause a 300 percent increase in the prices of products listed on websites like Temu. A more likely explanation is that Temu has deliberately raised prices as a precaution to avoid potential unspecified taxes or duties.

Prices may decrease in the coming weeks once there is greater clarity on how these new taxes will be implemented.

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According to the Temu Spokesperson, “The prices of some products may have changed due to recent changes in external policies and rising operational costs across various areas. We remain committed to providing access to quality products at affordable prices, while fully complying with local requirements.”