Three Pakistan operators have united in urging the government to drop its proposal to impose sales tax on SIM cards and handsets and called the device tax “irrational, illogical, arbitrary and incoherent”.
Mobilink, Telenor and Warid said the Federal Board of Revenue’s (FDR) procedure for imposing the sales tax is unconstitutional and almost impossible to implement, ProPakistani reported.
The new tax would increase the number of handsets with fake IMEI numbers as people take steps to avoid the tax, which would lead to tracking issues for law enforcement agencies, the companies said.
The three operators, which together have a 64 per cent share of the country’s mobile connections, submitted a detailed response to FDR, which has proposed introducing a tax on the import and supply of SIM cards. The country already taxes the import and supply of handsets.
The operators said that complying with the new taxes would be expensive and that the new tax regime will not solve the problem of the handset tax being avoided.
ProPakistani quoted a joint representative as saying: “The only solution for the government is to crack down on smuggling and charge sales tax at the import and supply stage.”
The reaction comes less than three weeks after the 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.
A committee, set up by the IT minister to study the impact of the higher taxes on operators, 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.