Higher telecom taxes slowing down digitalization in Pakistan

The mobile phone services sector has urged the government to rethink mobile taxation during Covid-19 as the importance of telecom services has risen in this difficult situation and the plethora of taxes imposed on them are taking digitalization down.

Higher telecom taxes slowing down digitalization in Pakistan

According to a research published by the Sustainable Development Policy Institute (SDPI), Pakistan is considered to be among the highest taxed telecom markets in the world while it ranks second highest in telecom taxation in South Asia. It is bringing digitalization down day by day.

Recently, Adviser to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh chaired a meeting to discuss the issues faced by the telecom sector following which, the government constituted a 14 member committee to address the issues and present recommendations to the prime minister.  

During the Covid-19 pandemic, the telecom sector of Pakistan is playing a vital role by providing connectivity and digital services across the country as people have moved to work remotely and adopting e-health and e-education while other online services are becoming rampant.

Despite this, there are a number of consumer taxes levied on mobile services, which the telecom industry has recommended to be rationalized and abolished.

Before analyzing the impact of these taxes, it is important to understand what they are and how they impact the consumer. The first is 12.5% withholding tax or advance income, which is deducted at the time of recharge.

Consumers are expected to pay this tax and claim it when they file tax returns.

At a time when lockdowns are in place and the average consumer’s disposable income is decreasing, their need to stay connected is increasing further hence there is a dire need to provide relief to 165 million mobile consumers, he argued.

The country has seen a surge in data usage during the past few months and a reduction in sales will alleviate the burden on consumers and they will be able to enjoy cost-effective services.