The Global System for Mobile Communications Association (GSMA) has asked the Pakistani government to rescind the Finance (Supplementary) Bill 2021’s increase in the withholding tax (WHT) on telecom services as soon as possible.
The GSM Association complained in a letter to Finance Minister Shaukat Tarin, Minister of IT and Telecom Syed Amin Ul Haque, and Chairman Federal Board of Revenue (FBR) Dr. Muhammad Ashfaq Ahmed that the increase in mobile service taxes is harming the economy.
Pakistan’s mobile sector, according to the GSM Association, has considerable potential, but current levels of mobile internet adoption, smartphone penetration, and digital service usage lag below those of other countries in the region.
It was estimated that by 2023, Pakistan’s mobile industry would contribute $24 billion to the economy, accounting for 6.6 percent of GDP.
The GSM Association commended the Pakistani government for carrying out the tax reform measures contained in the Finance Bill 2021-22, which were accepted by the federal cabinet.
“It was heartening to see the government announcing the reduction of withholding tax (WHT) from 12.5 percent to 10 percent in this year’s budget and a further reduction to 8 percent in the next financial year,” the letter read.
On the other hand, the association believes that increasing WHT from 10% to 15% under the new Finance (Supplementary) Bill 2021 will create a regressive barrier for end-users to access telecom services, disproportionately affecting the poorest, because it will be more difficult for them to claim these payments as advance tax.
It warned that raising sector-specific levies would stifle adoption and innovation, putting long-term industry growth and the country’s net economic gains at jeopardy. It went on to say that eliminating the withholding tax would boost low-income people’s access to telecom services.
The GSM Association stated that the pandemic has demonstrated the need of connectivity. According to the report, the necessity for connectivity will become even more critical in the future.
“Due to the negative impact of this increased tax levy, the situation presents a significant risk of the government achieving the Digital Pakistan Vision,” it added.
To read our blog on “In the Mini Budget, the IT Minister opposes the imposition of new taxes on the telecom sector,” click here.
