Tax on calls exceeding five minutes is unfavorable for the masses and equally difficult for Telcos to implement

The Federal government, in the budget for the fiscal year 2021-22, said that while there will be no tax on mobile internet usage and SMS, a tax of 75 paisas will be applicable on mobile calls exceeding five minutes.

CEO Jazz Aamir Ibrahim while highlighting the matter on a private channel expressed his concerns on the new tax labeling it as “anti-poor” as well as difficult to implement due to the audit and billing systems being used by the Telecom operators in Pakistan. Aamir further explained “We are waiting for further details regarding the tax — how it will be implemented and audited. We think that the mechanism seems impractical and it is highly probable that it will not be implemented.”

He also mentioned that while prepaid customer base is in majority in a lot of countries, he has not found a single example of a similar tax in place in any other country. CEO Jazz said users will adapt and change their behavior if the tax is imposed. “Our experience suggests consumers put a lot of thought into their buying and conversation patterns. If there is a tax imposition after 5 minutes, they are likely to end the call in 4 minutes and 50 seconds. It may be an inconvenience for the consumer, but it will not benefit the government.”

Jazz CEO also explained that the tech-savvy consumers using smartphones will just use WhatsApp for communication (data). “Only the low-income group that has feature phones will be burdened with this tax.”

The tax on mobile calls over 5 minutes has been deemed as “Poor Tax” by various industry experts and a hindrance to the progression towards the dream of Digital Pakistan. At a recent event, the Federal Minister for Information Technology and Telecommunication Syed Aminul Haque also spoke about the issue of tax on calls over 5 mins which was proposed in the recent budget.

Days ago, the GSM Association (GSMA), in a letter to Finance Minister Shaukat Tarin, urged the Government to withdraw the Federal Excise Duty (FED) on cellular calls. It said that the imposition will have a negative impact on demand and pose a significant risk for the government looking to achieve its Digital Pakistan Vision.

Aamir was of the view that rather than seeking additional revenue through regressive tax regimes, the government should enlarge the size of the telecom sector, which generates a revenue of Rs600 billion. “There is ample room for further increase in size, we have a potential of 180 million customers and there are 35 million customers who have not availed any telecom service.

Watch the complete discussion here.