The telecom sector has proposed the government to abolish the advance income tax on telecom subscribers who do not fall under the tax net as well as harmonisation of federal excise duty (FED)/general sales tax across the federation and all provinces.
A letter jointly written by all the four cellular companies maintained that mobile penetration and services uptake have already hit the glass ceiling and they would not be able to break this barrier until substantial tax relief is introduced. The letter has been drafted just at the start of the budget preparation exercise for 2018-19.
The taxes inhibit growth, discourage investment and stall services uptake among the masses, and this directly impacts the people to adapt the modern and latest technology. The cellular companies maintained that telecom sector suggests abolishment of advance income tax for that majority of telecom subscribers who do not fall under the tax net and yet have to pay withholding tax which that they cannot claim back. In addition, the sector recommends harmonisation of FED/GST across federation and all provinces and its rationalisation to 16 percent in line with GST/FED rates applicable on other sectors of the economy. Moreover, sector believes that data tax will not only hamper economic growth in the country but will also adversely impact government's initiatives for the proliferation of mobile broadband in Pakistan. Telecom sector strongly recommends abolishment of GST on data services by the provinces.
The sector has time and again called for rationalised reduction in taxes that will help ensure affordable services for the masses, which in turn will increase mobile penetration, bring further socioeconomic benefits to Pakistan and will go a long way towards realization of the government's ambition of a digital Pakistan.
According to the letter, the cellular sector, since its deregulation, has been at the forefront in introducing innovative services for enabling and empowering people and has played a key role in social and economic advancement. It has made substantial contributions to the welfare of society and is amongst the largest contributors to the country's exchequer in terms of direct and indirect taxes. The sector has invested over $15 billion in the economy since deregulation in 2003 and has created over 14,000 direct and hundreds of thousands of indirect jobs.
The sector is recognised as an enabler for society, bringing greater financial and digital inclusion as well as documentation of economy through mobile communication to 85% of country's population. It is directly aligned with the government's Vision 2025, striving to develop an ecosystem for digitalization, increase internet penetration and bridge the digital divide. Access to the useful digital and financial services is a game changer for masses as they usher in a plethora of opportunities for them to improve their standard of living.
The Senate Standing Committee on Information Technology also expressed its concern last week on high tax deduction on mobile recharge, particularly on deduction of advance income tax from majority of subscribers who do not fall under the tax net and have no way of claiming the refund. The Senate committee has directed the FBR and cellular mobile operators to present the recommendations towards a more rationalized tax regime.
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