OICCI calls for abolishment of telecom withholding tax

KARACHI: The Overseas Investors Chamber of Commerce and Industry (OICCI) has urged the government to abolish withholding tax on telecom users in Pakistan to increase affordability of internet and data services for low-income segments of society.

The OICCI pointed out that a majority of the subscriber base falls below the taxable limit, and high taxes hinder the affordability of mobile services, which are critical for the entire population. More than 70 percent of Pakistan’s population lives below the poverty line.

The OICCI is the largest chamber of commerce in Pakistan and represents more than 200 foreign investors from over 35 countries. Pakistan has the widest gender gap in mobile ownership (34 percent) and mobile internet use (43 percent) compared to its regional peers. Sector-specific taxes increase the cost of mobile services, which disproportionately impacts the poorest consumers, especially women, and lessens their ability to become mobile broadband subscribers.

Given that over 70 percent of the population lives below the poverty line and the percentage of return filers is nominal, implementing withholding tax on the entire subscriber base is not logical.

In addition, to encourage the use of alternate energy resources in the telecom sector, such as solar, OICCI has urged the government to reduce the custom duty rates for batteries to 5 percent and abolish additional custom duty and regulatory duty.

These batteries are used with solar and power systems, which are core assets for telecom infrastructure service providers. OICCI also urged the government to abolish the advance tax on auction/renewal of licenses. It called the tax irrational because spectrum is not sold, but only a right to use spectrum for a specified term is granted to telecom operators, and licenses are granted for a specific term only.

Moreover, the telecom sector has already paid a huge amount of advance taxes much beyond its tax liability. Secondly, no such advance tax is collected on the grant of other licenses like oil exploration.

The proposals also called for the harmonisation of federal and provincial sales tax laws to remove the anomalies and undue hardships faced by the telecom sector in terms of compliance in different jurisdictions.

Further, in line with international and regional practices, a uniform service tax law may be drafted and agreed upon by the tax authorities of the provinces and federal government for implementation in their respective jurisdictions.