As the government has proposed as high as 100% taxes on some telecom services (and actually more in some cases), the sector has rejected the ridiculous amount of new proposed taxes and termed the budget as an industry killer.

High-ranking officials of mobile phone companies, while speaking with ProPakistani, were shocked and were unable to comprehend the reasoning behind unexplainable taxing on the sector.

Below are the new taxes imposed on Telecom Sector:

  • Rs. 5 on Per GB of usage
  • Rs. 1 per call after first three minutes
  • 10 Paisas Per SMS

According to early calculations, Pakistani internet users consumed some 4,500 petabytes of the internet during 2020 and based on these numbers a sum of Rs. 225 billion in new taxes are imposed on internet usage only.

Moreover, the government is likely to generate Rs. 100 billion through a tax of Rs. 1 per call.

This means that a total of Rs. 325 billion in taxes are imposed on the telecom sector. Not to mention, the entire telecom sector contributed around Rs. 137 billion in taxes during 2019-20, which includes GST (provincial taxes), WHT, and FED.

There are conflicting reports that this proposal was tabled by the Finance Ministry and was not approved by PM and Cabinet, but nevertheless even a proposal like this is ridiculous and is meant to mock the taxing regime of the country.

Energy Minister Hammad Azhar has confirmed that the said tax on internet usage was just a proposal that was rejected by the cabinet and PM Imran Khan. The said clause will eventually be removed from the budget bill before it’s approved by the parliament.

Telecom Operators said they are still in process of getting confirmations on the mechanics and of the proposed taxes and will make a joint statement if the proposal is not withdrawn by the government.

Impossible to Implement

Experts say that imposition of tax is also a complex issue. First, the service sector is a provincial matter while on the other hand, people use various packages and bundles of internet, calls and SMS with varying prices and hence taxing the internet with a fixed rate will be a difficult task.

If a tax decision is imposed, the decision will reduce the consumption of mobile and internet services significantly and revenues of telecom companies as a result. It will also slow down the adoption of mobile broadband services in rural areas and villages.

A Bad Time for Telecom Taxes?

The decision will also discourage investments from the telecom sector, which is hard to digest as the government is gearing to auction further spectrum. It is incomprehensible to tax the sector that the government is eying to milk in the next 12-24 months.

The new tax will slow down the pace of 3G/4G service and economic activities subsequently.