Pakistan’s Ministry of Information Technology proposed a tax relief package for the telecoms sector, which struggled last year with declining revenue after the government raised taxes, ProPakistani reported.
A three-member committee, set up by the IT minister to study the impact of the higher taxes on operators, finalised its report and will submit it to the Finance Ministry for approval, the newspaper said.
The committee’s report found that the higher tax burden slowed revenue growth and hampered the government’s effort to hold a 3G/4G spectrum auction. Operators have repeatedly said they are not interested given their current financial status.
Operators’ revenue in Q3 fell 12 per cent to PKR102 billion ($98 million) from the previous quarter. Operators are also facing low margins and have long complained to the government about high taxes, low return on investments and weak economic growth.
The federal government imposed a 14 per cent withholding tax on internet usage in July and doubled the sales tax on various categories of imported mobile handsets in June to PKR300-1,000 ($3-$10). The government in Punjab introduced a 19.5 per cent sales tax on internet usage in early June.
A source told ProPakistani that the committee recommended lowering the tax. but did not detail the rate proposed. The committee also expressed concerns that the internet usage taxes were slowing uptake of mobile broadband services and said they should be scrapped immediately.
But the source said the IT ministry was uncertain as to how the Financial Ministry would respond to the committee’s recommendations.
The one bright spot for the country’s operators last year was strong data revenue growth. According to a report by the State Bank of Pakistan, data revenue in the second half of the year grew 69 per cent from the previous year.
Pakistan’s mobile broadband penetration last year increased from about 10 per cent to 18.5 per cent, according to GSMA Intelligence.