KARACHI: Having the fourth most heavily taxed telecom markets in the world, Pakistan managed to collect Rs 1,499.81 billion from the sector in various taxes in 15-years.
The telecom sector has become a veritable gold mine for the Pakistani government, attracting millions of new users every month and generating staggering amounts of money from tax revenue. Since 2002-03, the government has pocketed almost Rs 1500 billion from the sector till December 2017.
Recently, the Supreme Court (SC) has taken notice of ‘unreasonable’ tax deduction from mobile phone pre-paid calling cards and easy load facilities. The Chief Justice of Pakistan summoned the Attorney General (AG) and highlighted that there were complaints about taxes on calling cards being unreasonably high.
In this regard, the SC also issued notices to the Federal Board of Revenue (FBR) and all four mobile phone service companies operating in the country to appear before the court on May 8 (today).
According to the Pakistan Telecommunication Authority (PTA) data, the federal government collected Rs 749.31 billion only in terms of GST and Activation Tax indirectly from consumers in the last 15 years, while Rs 750 million was collected under other heads.
A telecom official, requesting anonymity, said that with one of the lowest calling rates and one of the highest taxation rates in the world, the industry margins were eroding continuously.
He said telecom companies kept demanding the government to eliminate WHT, rationalise FED/ GST, grant industrial status to the telecom sector, eliminate advance income tax on auction price of 4G spectrum and eliminate SIM issuance and IMEI taxes.
Telecom expert Shahzad Ahmad said mobile companies and government were making alot of money but the consumers were being heavily burdened by taxes for using telecom services.
He said if government could lessen the burden of taxes, the telcos could give significant relief to consumers since companies were charging only a maintenance fee from consumers.
“Any reduction in taxes will be beneficial for the mobile companies as usability of the telcos will increase which will translate into more revenue and healthy profits”, he added.
Interestingly, the Pakistan Telecommunication Authority (PTA), in its latest annual report, admitted that the WHT @12.5 percent on every mobile recharge and tax rates by provincial revenue authorities were still quite high and should be reduced. The PTA said harmonisation of federal and provincial tax laws was important to resolve sales tax collection issues and avoid undue litigation between operators and the federation.
High custom duty and other taxes on the import of mobile handsets and telecom equipment also impede the mobile penetration, it added. At present, telecom consumers are charged 19.5 percent in form of GST and 12.5 percent in form of WHT; while 16 percent GST and 10 percent WHT are charged in other sectors. Telecom sector is one of the highest tax paying sectors of Pakistan, as on every mobile recharge, consumers have to pay 14 percent of their charged amount in taxes.
Published in Daily Times, May 8th 2018.
