PTA Admits 12.5% Withholding Tax on Mobile Balance Recharge is High

Pakistan Telecommunication Authority (PTA) has admitted that the Withholding Tax of 12.5% on every mobile recharge is high because majority of the subscribers fall below the threshold of being a tax payer and hence, cannot get the paid amount adjusted in their annual tax returns

PTA’s annual report 2017 states that high custom duty and other taxes on the import of mobile handsets and telecom equipment impede the mobile penetration.

Rationalization of Taxes in the telecom sector was a major challenge being faced by the industry for the past few years. Withholding Tax has been brought down to 12.5% from 14% in the Federal budget for FY 2017- 18. However, the Withholding Tax at 12.5% on every mobile recharge is still high.

Similarly, Federal Excise Duty (FED) has also been decreased to 17% from 18.5% in the same budget. However, the tax rates by Provincial Revenue Authorities are still quite high and should be reduced following the example of the Federal Capital. Harmonization of Federal and Provincial Tax Laws is important to resolve the sales tax collection issues and avoid undue litigation between operators and the federation.

Telecom sector should be granted the industrial undertaking status so that the mobile operators are able to adjust the income tax paid at the time of import of telecom equipment, which is treated as a final tax liability.

The intense price wars among the operators topped with the fierce competition with the Over-the-top (OTT) services and grey traffic is shrinking the Average Revenue per User (APRU) of the industry.

Telecom access and expansion is hampered by the lingering Right of Way (RoW) issues, utility infrastructure and procedural delays in the approvals process at the provincial government’s level.

PTA has exerted tremendous efforts to improve the national and international connectivity of the country by providing regulatory facilitation to the interested operators.

The national fiber optic deployment has increased manifold whereas the results of NGMS spectrum availability are prominent in every walk of life. PTA is ready to face the emerging challenges of the upcoming resource demands by refarming the available spectrum. Moreover, the operators are also investing in the Fiber-to the-Home (FTTH) projects to provide fast, good quality and reliable communication to the consumers.