Telecom Sector Pushes for Withholding Tax Exemption
The Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed key tax reforms for the 2025–2026 fiscal year, aiming to ease the financial burden on Pakistan’s telecom sector and speed up 5G rollout. One major recommendation is exempting telecom companies from withholding tax on payments like imports and utility bills, which currently increase both costs and administrative load.
Minimum Tax Adjustability for Telecom Services
Telecom operators currently face a 4% minimum tax under Section 153(1)(b) of the Income Tax Ordinance (ITO). OICCI recommends making this tax adjustable to improve cash flow and enable infrastructure development.
Restore Lower Tax Rate on Telecom Services
After a rollback in 2021 increased the advance tax on telecom services back to 15%, OICCI suggests either removing this tax for subscribers—most of whom are below the taxable income threshold—or reducing it to the previously planned 8%.
Unified Sales Tax Across Provinces
The current mismatch between federal and provincial sales tax rates complicates compliance and risks double taxation. OICCI proposes a uniform telecom sales tax nationwide, backed by a harmonized legal framework to support efficient 5G deployment.
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Reclassify Spectrum Licensing Tax
Treating spectrum auctions as taxable sales has added undue financial strain on operators. OICCI urges a change in classification under Section 236A of the ITO, recognizing spectrum as leased, not sold, to avoid unnecessary taxation.
Reduce Duties on Power Equipment and Fiber Deployment
To support 5G, OICCI recommends removing the 5% regulatory duty on lithium-ion batteries and excluding telecom power gear from retail valuation. It also calls for exemptions on optic fiber duties to lower infrastructure costs.
Tax Relief for Foreign Telecom Equipment Suppliers
Current tax rules require a 20% withholding on imported telecom equipment, even when ownership transfers offshore. OICCI wants this tax scrapped and telecom equipment reclassified under Part I of the Twelfth Schedule, bringing parity with other industries and encouraging rural expansion.
Towards a Digitally Advanced Pakistan
These tax reforms, if implemented, could remove barriers to investment, reduce operational costs, and pave the way for a nationwide 5G rollout—potentially unlocking over $5 billion in economic value.
