Wednesday July 06, 2022

Govt mulls tax breaks for local mobile industry

June 24, 2022

By Mehtab Haider

ISLAMABAD: The Ministry of Information Technology & Telecommunication on Thursday asked the Ministry of Finance to slash down advance tax on mobile subscribers by 5 percent and reduce the tax rate on locally manufactured mobile phones priced less than $100/phone set.

Federal Minister for Finance and Revenue Miftah Ismail presided over a meeting on the tax related issues of the IT and telecom sector at the Finance Division.

The minister assured the telecom sector that he would consider bringing down the rate of advance tax when his team would be finalising the finance bill 2022-23, provided the Prime Minister granted him a go-ahead.

He also apprised the meeting that one percent reduction in advance tax on mobile subscribers could cause revenue loss of over Rs5 billion.

The stakeholders were demanding the government to bring down the advance tax on mobile subscribers by 5 percent from 15 to 10 percent. The last regime had increased the advance tax from 10 to 15 percent through a mini budget.

The Ministry of IT & Telecom also asked the Ministry of Finance to bring tax on locally manufactured mobile phone sets having price of less than $100 per set.

The tax rate on more than $100 per set should be increased. The ministry did not raise any objections over it.

According to the telecom sector, average revenue per user (ARPU) per month, a key tool to measure financial health of mobile operators, dropped from $9 in 2003 to $1 now, which is alarming.

The country ranks 235/238 in terms of lowest ARPU as per @GSMAi. Weak financial health limits operators’ ability to ensure consistent improvement in quality of services.

“Pakistan has one of the lowest ARPUs in the world, which affects CMOs’ capacity to invest in network and spectrum. To ensure consistent improvement in service quality and expand broadband services, a policy & regulatory environment that enables the mobile operators to remain financially healthy is critical,” said Aamir Ibrahim, CEO, Jazz.

“The relevant policymakers need to ensure that the sector stays sustainable through assured return on investment.”

He said unless the industry’s ARPU doubled in the next 12 months, there would unfortunately be no business case to further invest in enhancing quality or coverage.