The telecom industry said that advance income tax made mobile phone ownership and internet usage unaffordable, especially for low-income people. The telecom industry has now requested that the government cut the advance income tax in the budget plan for 2022-23.
The telecom industry is pushing for a reduction in advance income tax.
“The industry’s profitability was being harmed by the current 15% taxes, which hampered the business case for network expansions and service upgrades.” In a letter to the Ministry of IT and Telecom, the industry stated that “it impedes the affordability of mobile ownership and internet services, which are vital for the entire population in this era, as well as the country’s economic progress.”
Pakistan has one of the world’s highest telecom tax rates. The country has the second-highest telecom taxes in South Asia, at 34.5 percent, comprising 15 percent advance income tax and 19.5 percent GST.
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Finance Act 2021 cut advance income tax from 12.5 percent to 10 percent for FY 2021, with a promise to 8 percent from then on. The decision was reversed six months later, without proper thought for the long-term consequences.
The AIT rate has been raised from 10% to 15% by the Finance (supplementary) Act of 2022, bringing the total tax on over 193 million telecom subscribers to over 35%.
“AIT under Section 236 of the Income Tax Ordinance, 2001 (ITO) should be gradually phased down as a policy provided that “Efforts should be concentrated on more direct revenue measures directed at companies, rather than expenditure on a necessary service,” the sector stakeholders said in the letter.
The telecom industry also requested the State Bank of Pakistan to lift the 100% cash margin limit on telecom equipment imports.
“The telecom sector is completely reliant on its equipment to meet its quality-of-service and network-expansion commitments, as specified by our various licences.” The stakeholders stated that “telecom equipment is not a luxury item.”
The industry also requested that federal and provincial sales tax laws be harmonised.
