Cut taxes or face no further investment,cellular operators warn govt

ISLAMABAD: While the government is charging 37 percent taxes from consumers, all cellular operators on Thursday proposed five-point demands list by asking the government to reduce the advance tax from 14 to 10 percent, reduce federal excise duty (FED) and bring it on par with other sectors, abolition of FED/GST on data services, elimination of taxes on imported mobile sets and doing away with SIM issuance tax in the upcoming budget 2017-18.

In a joint official communication sent to government’s functionaries by all the telecom operators and sharing its contents with the media at a local hotel on Thursday, the representatives of telecom operators expressed apprehensions that now the government was contemplating upon options to further expand the withholding tax on cash withdrawal through mobile franchises in the upcoming budget exceeding Rs50,000 amount. In such circumstances, they stated that most of the telecom players would stay away from the auction process of remaining spectrum of 4G, which is scheduled to take place by mid of May.

The telecom companies' representatives, especially from Telenor, Ufone and others, tabled the five-point demands for the budget makers to reduce the tax burden by making public commitment that the rate of taxes would be reduced while they will help the tax machinery to expand the base so there would be no loss to revenue generation.

In their presentation, the telecom companies' representatives argued that telecom contributed Rs157 billion in 2015-16 out of the total generated revenue to the tune of Rs455 billion. The number of subscribers has gone up to 142 million after making billions of dollars investment. Telecom operators took the stance that the existing tax burden on consumers was phenomenal on the higher side as the Federal Board of Revenue (FBR) was charging 14 percent advance tax, Rs250 SIM issuance tax, FED/GST on voice ranging from 18.5 to 19.5 percent, FED/GST on data services 19.5 percent, IMEI tax Rs300 to Rs1,500 (it’s on hold so far) and FED on banking services 13 to 16 percent. These all taxes will have to be paid by consumers before availing services and it can be up to Rs2,250 plus 14 percent advance tax.

They stated that the GST on services was continuously charged on the higher side in all the provinces compared with other sectors. In Sindh, the GST is charged at the rate of 19 percent from the telecom sector while its rate for other sectors stands at 13 percent. The GST rate on services in Punjab is 19 percent, while for other sectors, it stands at 16 percent. In Balochistan and KP, the rate of GST on services stands at 15 percent, while the rate of telecom is 19.5 percent. In Islamabad, the GST on services for the telecom sector is 18.5 percent, while for other sectors it stands at 16 percent.

Pakistan’s taxation rate of GST/FED on mobile services was the second highest among the selected Asian countries as its rate stands at 5 percent in Myanmar, 6 percent in Malaysia, 7 percent in Thailand, 8 percent in Iran, 10 percent in Cambodia and Indonesia, 11 percent in China and Sri Lanka, 13 percent in Nepal, 14 percent in India, 15 percent in Bangladesh and 19 percent in Pakistan. Only in Uzbekistan, the rate of GST stood at 20 percent.

The withholding tax rate for telecom is on the higher side as compared with many other sectors in Pakistan as consumers are paying 14 percent on telecom services while on petroleum distribution, the rate of WHT is 12 percent, advertising agent commission 10 percent, fixed telephone/internet 10 percent, functions 5 percent, air travel 5 percent, supply of other goods/services 4 percent, general insurance 4 percent, transport 2 percent, print and electronic media 1.5 percent and printing, stitching and embroidery 1 percent.

“There is a need to reduce the tax burden otherwise there is no possibility of further investments from our management as they possess options to explore avenues in other regions and countries,” they concluded.