Telecom Sector Wants Cut in Advance Income Tax
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 proposal for 2022-23.
“The industry’s profitability was being harmed by the current 15% taxation, 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 age, 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 taxation in South Asia, at 34.5 percent, including 15 percent advance income tax and 19.5 percent GST. 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% under the Finance (supplementary) Act of 2022, bringing the total tax on over 193 million telecom subscribers to nearly 35%.
“As a policy, AIT under Section 236 of the Income Tax Ordinance, 2001 (ITO) should be gradually phased out because it disproportionately affects the subscriber base below the taxable limit, and efforts should be focused on more direct taxation measures aimed at laconic, rather than expenditure on an essential service,” the sector stakeholders wrote in the letter.
The telecom industry also urged the State Bank of Pakistan to lift the 100% cash margin restriction on telecom equipment imports.
“The telecom industry 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.”