The proposed taxes on mobile phones and telecom services in the nation were voiced by the telecom sector. A 25 percent tax on phones over $500 and an 18 percent GST on phones under $500 are included in the newly proposed budget for the fiscal year 2024–2025.
Due to the high cost of connectivity, telecom companies claim that these new tariffs will impede the advancement of digital technology and widen the digital divide in the nation.In Pakistan, where 20 percent of the population still lacks connectivity and about half of the population cannot use mobile broadband due to exorbitant costs, affordability is still one of the key drivers of the country’s digital divide.
The government has proposed a massive 75% withholding tax on telecom services for non-filers, in addition to the GST on mobile phones. The Finance Act, 2021, lowered the withholding tax, which is currently 15 percent, to 10 percent with the promise that it would drop to eight percent in the following years. The Finance Supplementary Act, 2021, restored the tax to fifteen percent, reversing this reduction.
The Telecom Operators’ Association expressed worries about the budget projections for 2024–25, stating that the increased taxes on smartphones and telecom services will further drive up the cost of these necessary services for Pakistanis.The operators issued a warning, stating that the actions will worsen the lives and livelihoods of millions of people and increase the digital gap.
Moreover, telecommunications companies have issued a warning, claiming that the recently proposed phone and telecom levies in the most recent budget will deter rather than encourage foreign direct investment (FDI).
The Telecom Operators’ Association said, “It shocks us that the government hasn’t learned anything from these unfortunate FDI exits. Over the past ten years, we have seen two major telecom players leave the Pakistani market.It is extremely upsetting and detrimental for the nation’s digital agenda that the telecom industry in Pakistan, which has already been among the most taxed worldwide, is being treated like a low-hanging fruit to make quick cash.”
The group emphasized that Pakistan’s telecom industry, which has spent over $20 billion in the nation and is one of its biggest sources of income, is essential to the nation’s advancement in digitalization. It emphasized that telecom services are essential to bringing the ideal of a Digital Pakistan to life, but regrettably, decision-makers and the government are oblivious to this harsh reality.
The government’s intention to penalize operators who disobey the new directives has also caused the telecom corporations great concern.The Federal Board of Revenue (FBR) was directed by the Income Tax General Order to penalize implementing agencies that neglect to sever utility
connections, block SIM cards or mobile phones, or abide by the recently implemented travel ban. with a fine of Rs. 200 million for each additional default after the first of Rs. 100 million.
The operators said, “The new taxes and punitive measures are completely unworkable for operators because the local telecom infrastructure cannot support the proposed deductions, in addition to being detrimental to FDI and digitalization.”
The telecom sector, which has long called for the withholding tax to be completely eliminated or reduced, is incensed over the latest tax proposal and compares it to extinguishing the nation’s digital goal.
