GSMA calls for removal of withholding tax on telecommunications services – Journal

ISLAMABAD: To improve the accessibility of mobile services and encourage the adoption of communication services, especially for low-income segments in Pakistan, the Global Mobile Industry Association (GSMA) has proposed the phasing out of the withholding tax on income (AIT) on telecommunications services.

In a letter to the Minister of Finance, Federal Board of Revenue (FBR) and Minister of Information and Telecommunications Aminul Haq, the GSMA made key recommendations on tax reforms to accelerate the digital economy, including reducing the AIT rate from 15 percent to 8% in the next federal budget as provided for in the 2021 budget law, and repealing the increase in the AIT rate achieved through the 2022 budget law.

The GSMA said mobile consumers face a high level of industry-specific taxes in addition to general taxes.

There is a 19.5% sales tax on mobile services, plus a 15% AIT, which is among the highest in the region.

This creates additional barriers to digital inclusion for low-income households. Removing sector-specific consumption taxes would accelerate digital inclusion by making it easier to access and use mobile services.

The GSMA said a reduction in consumption taxes would generate an increase in government tax revenue and GDP in the medium term. This would result from the expansion of the mobile sector and the induced productivity growth.

The international association said the AIT was particularly regressive given that many low-income users are not required to and do not file their tax returns and therefore cannot claim the tax refund.

“Therefore, applying this tax to the entire telecommunications subscriber base disproportionately increases the cost of mobile ownership for the poorest people and further widens the gap. in terms of mobile ownership and use,” the letter added.

He added that there was a large unconnected population in terms of unique subscribers, and the GSMA estimates that around 43% of Pakistan’s population remains unconnected to a mobile network and only 30% of the population uses mobile phones. mobile Internet services, which is below the average in South Asia.

The tax contribution of the mobile sector in Pakistan remains considerably higher than the average for Asia and other regional averages, which limits the ability of mobile operators to invest in connectivity, as well as the availability and affordability of services. mobile for consumers.

He added that in 2020, the total tax contribution from the mobile sector stands at 170 billion rupees or 38% of mobile sector revenue.

But it was significantly higher than the Asia-Pacific average of 24% and the global average of 22%.

The GSMA further stresses that the 100% margin restriction on imports imposed by the State Bank of Pakistan on telecom equipment should be removed for telecom equipment to avoid jeopardizing current and future deployment. of the network.

He added that “tariffs” should be reduced on batteries used for telecommunications infrastructure to encourage the use of green energy. An enabling regulatory environment, especially the fiscal framework, is necessary to accelerate the digital transformation of countries and maximize the benefits of connectivity.

Posted in Dawn, May 22, 2022