Multiple taxes on telecom sector hamper investment: OICCI

KARACHI: Cellular telecom operators said multiple taxes on mobile subscriber identity module (SIM) cards and handsets are hampering investment in the sector, calling for their withdrawal in the next budget of 2017/18. 

Overseas Investors Chamber of Commerce and Industry (OICCI), representing the foreign businesses and telecom companies, said there is Rs300 to Rs1,500 tax on handset, Rs250 sales tax on SIM issuance and Rs300 to Rs1,500 international mobile equipment identity tax.

OICCI, in its budget proposals, said the imposition of multiple taxes on SIMs and handsets directly restricts investment in the telecom sector.

Pakistan’s telecom sector has four cellular mobile operators, namely Jazz (Mobilink-Warid), Zong, Ufone, and Telenor – all are foreign-owned. The telecom firms have invested huge amount in infrastructure and 3G/4G spectrums rollout. Overseas investors urged the government to give telecom sector the industry status as telecom companies are not commercial importers and imported equipment are used in the network to provide services rather than for further sale. So, import tax should be considered as an advance income tax rather than final tax. They said import tax on telecom equipment of 5.5 percent is considered final tax and therefore it can’t be adjusted against final tax liability. 

They said there is an issue, as telecom companies have not been declared as industrial undertaking in line with the income tax law. “The telecom companies are industrial undertaking under telecom policy but not under income tax law.”

OICCI said the finance minister, during various meetings at the time of 3G auction, had agreed on the grant of industry status to the telecom sector. Ministries of information technology and industries both have granted the industry status to mobile operators.

It said fixed tax on import of telecom equipment increases the cost of network, which is an additional barrier to mobile network coverage in Pakistan. “The 3G network rollout is still at the early stages and it is the key to the market development so the operators are able to sustain the necessary investment.”

Telecom firms said the imposition of eight percent minimum tax on corporate sector increased the cost of doing business and resulted in hardship for the taxpayers, who are already facing losses. They said the government should give benefits to the services sector across the board.

They said telecom industry is one of the highly-taxed industries in Pakistan. Currently, the government imposes 18.5 percent federal excise duty and 14 percent advance tax on telecom services and the taxes are significantly higher as compared to other countries.  The government should abolish customer advance tax and reduce the federal excise duty (FED) in line with the applicable general FED and sales tax rates.