Telecom industry: Mobile operators collectively raise voice against tax proposals

ISLAMABAD: All telecom operators have collectively cautioned Finance Minister Shaukat Tarin that the implementation of the new levy of Rs 0.75 tax on calls exceeding five minutes is technically impossible and cause major disruption and damage to the service model structure of the telecom sector.

In a communication to Finance Minister Shaukat Tarin and Syed Aminul Haque, Minister for IT and Telecommunication, the mobile operators have collectively raised voice against the taxation proposals for telecom industry in the Finance Bill, 2021.

The letter said that as telecom industry, the operators were extremely concerned about the following quote from the draft Finance Bill 2021-22 but are really thankful that the finance minister clarified about the same the very next day in the post-budget press conference terming that it was not approved by the Cabinet and the Prime Minister. "In order to reap reasonable revenue from this sector, federal excise on mobile phone calls exceeding three minutes at Re1 per call, SMS message at Re0.1 per SMS, and internet data usage at Rs5 per GB is being proposed."

However, despite that clarification, the finance minister in his speech in the Senate announced a levy of Rs0.75 as tax for each voice call exceeding five minutes duration.

The industry strongly feels that this proposed taxation, if implemented, will significantly retard the role of Telecom Industry in the GDP growth of Pakistan.

Aggressive measures like these to further tax the voice usage by telecom consumers (which is already rated as one of the highest rates of taxation in the world), run opposite to the Government of Pakistan's stated agenda and vision of a Digital Pakistan.

If this proposal is forced to be implemented, this regressive measure shall have the following unintended technical and commercial consequences in addition to the legal implications of the said levy on nationwide basis:

(I); Implementation in our billing/charging platforms is (almost) technically impossible and if forced upon the industry, shall cause major disruption and damage to the service model structure of the Telecom Sector.

(II); This levy would be unimplementable and will result in withdrawal of free minutes and bundles which are used by majority of our customers. As a matter of fact, more than 90% of voice minutes are consumed through bundles, so if this facility is consequently withdrawn and normal rates are charged to the customers; their call rates will go up by multiples.

(III); It is a zero-sum measure. Forcing this tax on subscribers will lead to fundamental changes in consumption behaviours, which will lead to shrinkage of the Industry's revenue base (possible shifting of voice revenues to OTTs) and potentially erode other taxation revenue streams of the GoP.

(IV); Auditing this revenue stream will be prone to insurmountable complications; as each call record will have to analysed and audited. This means FBR will need to sniff through billions of call minutes/records to audit the same. How would that be practically possible?

(V); With the introduction of this new proposed levy, GoP would be disproportionately putting additional tax burden on the very poor and vulnerable section of the society, causing extreme distress and desolation to them. It should also please be noted that we are talking here of migrant workers and daily wagers who are earning a living long distances away from their homes; and mobile telephone call is the only form of economical communication which they can afford with their family/loved ones.

The proposed taxation on voice calls is regressive.

Apart from the apparent challenges w.r.t. its implementation as mentioned above, it will impact the low and vulnerable segments of the population the most.

This is the very segment, which the PM of Pakistan had vowed to protect, when the proposal to levy this tax was first presented to the Cabinet and was rejected then in its entirety.

As you would be aware, the poor strata of our society, which constitute most of our subscriber/consumer base, are already paying more than their due share of taxation, through Withholding Tax (WHT) as well as GST/FED on calls, it said. Facilitating the growth of the telecom sector aligns with the government's national development and economic objectives. It is our earnest view that the taxation relief measures approved by the Federal Cabinet shall further bolster government's efforts towards achieving inclusive economic growth, creating new jobs, digitization of economy to transform Pakistan into a knowledge economy and therefore such regressive taxation proposals taxing the common man using voice calls for connectivity need to be withdrawn accordingly.

In view of the foregoing, there are unintended consequences of this proposed levy, especially on the poor and once again withdraw the proposal for good.

The industry is very hopeful that your continued patronage will stimulate industry stability and a delegation of our CEOs would look forward meeting with you both at your earliest convenience to further discuss the same accordingly, it added.

Copyright Business Recorder, 2021