‘Increase in taxes puts Digital Pakistan vision at risk’

Karachi: The Global System for Mobile Communications Association (GSMA) has expressed concern over the increase in taxes on telecom services and mobile phones in the mini-budget and has advised the government of Pakistan to review its decision.

GSMA is the global mobile industry association with more than 750 operators in its fold. It says it supports countries in transitioning towards a digital economy.

In collaboration with regulators, policymakers and the wider digital sector, GSMA contributes to tax policy dialogues at a national and global level.

In a letter to Federal Minister for Finance Shaukat Tarin, Federal Minister for IT Aminul Haq, Federal Board of Revenue (FBR) Chairman Dr Muhammad Ashfaq Ahmed and Pakistan Telecommunication Authority (PTA) Chairman Amir Azeem Bajwa, GSMA said that increase in taxes on telecom services and mobile phones would affect Pakistan’s economy. With a withholding rate increasing from 10 percent to 15 percent, it would be difficult for the poor to access mobile services.

The process of innovation and growth in the sector would also be affected, which would also impact Pakistan's economy. The increased tax levy presents a significant risk to the government in achieving the Digital Pakistan vision, the letter added.

“The telecommunication sector is a key enabler for social and economic growth and Pakistan's mobile market has significant potential, but current levels of mobile Internet adoption, smartphone take-up and usage of digital services lag behind those of other countries in the region by 2023,” the letter said.

It was projected that the economic contribution of the mobile industry in Pakistan could reach $24 billion, accounting for 6.6 percent of the GDP.

However, the GSMA was concerned about the increase in withholding tax from 10 percent to 15 percent in the mini-budget that has been approved by the cabinet. This regressive tax creates a barrier to access mobile services and affects the poorest the most as it would be more difficult for them to claim these payments as an advance tax, it said in the letter.

Pakistan has the widest gender gap in mobile ownership (34 percent) and mobile internet use (43 percent) as compared to its regional peers. Sector-specific taxes, such as those on smartphones and data usage, influence retail prices and might have a strong impact on the poorest consumers especially women, lessening their ability to become mobile broadband subscribers.

“Connectivity has never been more important as the pandemic has highlighted its need and will continue to be even more essential moving forward,” the letter read.

Meanwhile, mobile dealers have also criticised the government's decision to increase duties on mobile phones and laptops in the mini-budget, saying that it was in stark contrast to the government’s vision of Digital Pakistan.

A mobile dealer and Karachi Electronics Dealers Association (KEDA) President Rizwan Irfan said the government ostensibly speaks about Digital Pakistan, but what they were actually doing completely goes against it. “Mobile phones and laptops were never more important than they have been during the coronavirus pandemic, and the lower-income group will be affected mostly, as this group is highly price sensitive,” he added.

People in Pakistan would be using outdated phones, while the rest of the world would be making impressive technological advancements using latest technologies, he said. Better cell phones and laptops mean better academic and professional performance, but not for Pakistanis, as the government instead of enabling easier access, was making it more difficult for people to get their hands on better devices, he added.

Alpha Beta Core CEO Khurram Schehzad said that the IT sector has immense potential, which the recent IT exports data showed.

However, increased taxes on internet access would also impede digitisation therefore it would hinder digital economy too. He also said that it all goes against Prime Minister Imran Khan’s vision of Digital Pakistan.