The Global System for Mobile Communications Association (GSMA) has proposed a reduction in taxes on telecom customers to increase the affordability of digital services.
With overall taxes of 34.5% on telecom users, including 15% withholding tax (WHT) and 19.5% general sales tax (GST), Pakistan is one of the highest taxed telecom markets globally.
It is pertinent to note that the mobile industry makes a significant economic and social contribution. It plays an important role in driving digital transformation as mobile technology will be critical to achieving the Digital Pakistan Vision.
However, GSMA pointed out, the tax contribution of the mobile sector was significantly higher compared to similar markets in the region, which severely limited the capacity of the industry to invest in the network.
Given the current challenging economic conditions in Pakistan, “GSMA recommends that the government implements tax reforms that improve the business environment without significantly impacting the exchequer.
“These reforms would enable further expansion of broadband services, accelerate digitisation, and increase productivity in the country.”
In its recommendations submitted to the Ministry of IT and the Pakistan Telecommunication Authority for Finance Bill 2023, GSMA emphasised that high taxes on mobile broadband services and handsets were adversely affecting the affordability of essential mobile and broadband services, particularly for the poor.
It prioritised the reduction of advance income tax (AIT) to improve the affordability of mobile handsets and broadband services.
Moreover, the regressive nature of AIT was highlighted, as many low-income users were not required to file tax returns and therefore could not claim tax refunds.
Published in The Express Tribune, May 17th, 2023.
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