ISLAMABAD: Pakistan is on the top in terms of combined tax rates of 33 percent on the use of mobile services among nine regional and peer countries, reveals a GSMA report submitted to the government for budget 2025-26.
It recommended the government to slash both advance taxes and GST in the next budget.
The Global System for Mobile Communications Association (GSMA), in its report to the Ministry of Finance and Information Technology, stated combined tax rate on the use of mobile services has reached 33pc in Pakistan. This includes 18pc sales tax and 15pc advance tax on recharge. Not many neighbouring countries impose such sector-specific taxation on mobile services, and amongst those, Pakistan has the highest rates, it said.
The combined tax rates on the use of mobile in Nepal is 26pc, 23 percent in Sri Lanka, 18pc in India, 12pc in Philippines, 11pc in Indonesia, 9pc in Singapore, 7pc percent in Thailand and 6pc in Malaysia.
The report said telecom sector in Pakistan is burdened with high sector-specific taxes and levies that increase costs for both operators and consumers. This financial strain can hinder growth and investment in the sector.
“Leveraging our experience as a global industry body on policy best practices, we would like to submit for your consideration following recommendations. If implemented, could make tax regime more conducive to Pakistan’s digital transformation goals”, the GSMA report said.
Mobile connectivity is a key driver of economic growth, with International Telecommunication Union (ITU) estimates showing a 10pc increase in mobile broadband penetration can raise GDP per capita by up to 2.43pc. A 1pc increase in Pakistan’s GDP could translate to over $3 billion.
The report recommended the government to reduce custom duty and exempt regulatory duty ranging from 5pc to 15pc on telecom equipment. Reduce advance income tax from 5.5pc to 1pc and increase carry forward period of minimum tax credit from three years to five years. Aligning mobile sector taxation levels with the rest of economy, and providing incentives to encourage investment into mobile infrastructure, including withdrawal of 4pc minimum tax regime, exempt the grant of telecom licenses, radio spectrum, and related renewals from payment of advance income tax.
It asked for reducing tax burden on mobile consumers to enhance affordability of mobile and mobile services and reducing advance tax on recharge from 15pc to 12.5pc, aiming for 10pc.
Reduce sales tax on mobile services to 16pc and remove or reduce import duty on handsets to enhance affordability of mobile phones.
The GSMA demanded telecom sectors should be exempted from deduction or collection of all types of withholding taxes in line with exemptions granted to banking and oil sectors. The 75pc advance tax rate for non-filers should also be abolished.
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