Government Should Lower Taxes on Telecom Services: Cellular Companies

All cellular companies, except Ufone, have collectively asked the government to reduce taxes on telecom services. In a collective letter, mobile phone companies have mentioned the government to reconsider increased GST, taxes on handsets and removal of SIM activation tax.

This was carried away after a significant decline in revenues and increased operational expenses of cellular companies. However, cellular companies are still awaiting any positive response from the government regarding this.

While discussing the issue with senior officials of cellular companies, they showed their concerns over the taxes that were imposed on telecom services. “Throughout the country, there is 16 percent GST on all services, it is relatively unfair for Telecom sector to bear 21 percent GST”, commented one of official. He said that, government should reap the benefits of telecom sector for longer period, but these increased taxes on sector will curtail not only government’s share in the long run but is also leading cellular companies towards a catch.

It may be recalled that mobile phone handsets’ prices were also hiked by Rs. 500 tax per handset – which was further increased by another Rs. 250 to reach Rs. 750 tax per handset. It is also observed, through market survey that mobile phone retailers have increased mobile prices by Rs. 1000 to Rs. 1200. This increase is also seen in used handsets (second hand mobiles) in similar manner.

All these elements are collectively impacting the telecom sector and its growth that has seen a steep decline in recent months. Financial analysts term this situation a strategic mistake by government to put extra burden on a single industry to level its deficits.

By the way, Cellular industry paid PKR 100 billion taxes in year 2007-08, and it is expected that these share will hit PKR 120 billion mark this year.

Not only the telecom users but telecom companies also pay huge money for their licenses to the government of Pakistan, which values $147 million annually.

While eyeing current economic situation of the country, one should not expect any good news regarding these taxes from government, but financial gurus must tackle the situation in an effective manner to revive telecom sector.

It merits mentioning here that a mobile customer can use Rs. 64 only out of Rs. 100 card after paying taxes and service charges.