PTA Recommends Rationalizing Tax Regime for ICT Sector

Pakistan Telecommunication Authority (PTA) has recommended the government to rationalize tax regime for information and communication technology (ICT) sector and cut taxes on consumers of mobile phones and telecom operators to encourage new investments and usage of telecom services in the country.

PTA has stated that the country’s ICT sector is overburdened with taxes and recommended the government to bring down taxes for consumers and telecom operators for increased investments, usage of telecom services in the country.

According to official documents, PTA has stated that it is of the view that Pakistan’s ICT sector is overburdened with taxes that need to be rationalized. It will continue to engage with revenue authorities for tax rationalization in the ICT and telecom sector to encourage further investment and job opportunities.

The constituents of the fourth industrial revolution such as artificial intelligence, the Internet of Things, blockchains and big data hold the key to a prosperous digital future.

However, impediments like non-availability of latest technology and networks can be removed only through increased investments from financial comfort of operators. High taxes on operators as well as consumers are therefore required to be brought down for not only increased investments but also to increase the usage of telecom services in the country.

“Our engagement with the revenue authorities for tax rationalization in the ICT and telecom sector will continue so that improved tax structures can encourage further investment and job opportunities”, the Authority added.

The Supreme Court of Pakistan suspended sales tax, withholding tax and service charges in June 2018 on the pre-paid reload/recharge and usage. CMOs’ implemented the order of Supreme Court in letter and spirit and stopped deducting taxes (GST / FED and WHT) and services charges from prepaid consumers.

Resultantly, pre-paid subscribers got 100% balance (i.e. Rs. 100 upon recharge of Rs. 100). However, the same taxes were restored by apex court on 24 June, 2019. Resultantly, CMOs started levying taxes on their packages. After the restoration of taxes, it was observed that due to competition in the market, some CMOs reduced their mobile data tariff and did not pass on the impact of taxes on their consumers.

CMOs also started incentivizing their subscribers by offering more on-net minutes, SMS and data bundles. PTA created awareness among consumers and issued press releases in the print media stating that “After restoration of taxes by the Supreme Court of Pakistan, CMOs have not increased the rates, instead they have applied taxes on the existing tariff.”

Furthermore, the general public was assured that “PTA is vigilant about the rates/tariff being charged by CMOs and action will be initiated on any reported incidence of charging above the published tariff and applicable taxes.”