High Taxes & Duties for TELCOS obstructing progress on Digital Pakistan

The telecom industry has sought exemption from taxes and duties on import of telecom equipment in the upcoming budget. Citing the fact that the local telecom industry is one of the most taxed in the world, experts believe it is imperative to reduce the burden on consumers and mobile operators if the government’s Digital Pakistan vision is to become a reality.

Video Courtesy: AAJ News

The government has imposed an additional customs duty of 4% and regulatory duty of 9% on top of the 16% customs duty that already existed on the import of telecom equipment, putting a financial strain on telecom operators.

There are no alternatives available for the mobile network operators as these devices and equipment are not locally produced. These higher costs limit the expansion plans of mobile cellular companies and also affect mobile broadband proliferation, depriving the population from readily available, quality mobile and internet services.

The telecommunication industry has also requested the government for the rationalization of sales tax and federal excise duty (FED) on telecom services. Currently, FED is charged at the rate of 17% on telecom services, which is on the higher side as compared to other sectors and also in comparison to the general rate.

Similarly, sales tax on other services in Sindh was 13%, while it was 15% in Khyber-Pakhtunkhwa and Balochistan and 16% in Punjab. However, sales tax on telecom services is 19.5% in all four jurisdictions.

At the same time, GST on services must be reduced since sales tax is a consumption tax, the decrease in sales tax rate will result in increased usage of telecom services and consequently drive tax collection upwards.

Half of Pakistan is currently offline including 15% population living without any telecom coverage. By reducing the burdensome taxes and duties, more people will come online, as services become more affordable and operators invest in network expansion in unserved areas.