Telecom Sector’s WHT Contribution Increases by Over 200% in FY20

The contribution of the telecom sector on the account of withholding tax has increased by over 200% in the financial year 2019-20.

According to the Federal Board of Revenue, withholding tax from the telecom sector surged to Rs. 54.63 billion in the outgoing financial year FY20 as compared to Rs. 17.18 billion recorded in FY19, showing a 217% year-on-year increase.

The massive growth in the consumption of taxes was recorded subsequently after the re-imposition of 12.5% withholding tax, which remained suspended for a few months on the directives of the Supreme Court of Pakistan in FY19. In FY18, the contribution of the telecom sector on the account of withholding tax stood at Rs. 47.38 billion.

The growth in withholding tax was inevitable with its restoration, however, the increase in the utility of the voice and internet services during the pandemic related lockdown also increased the value of the overall tax collection in FY20.

Industry analysts said that the removal of taxes and mobile phone charges had provided extra airtime to the users, resulting in an increase of consumption of services benefiting the operators along with the users.

Income tax returns filers, who make up for very little mobile phone userbase, readjust the amount of withholding tax in their taxes. However, a majority of the non-filer subscribers could not claim the readjustment of the tax.

Overall, the telecom sector contributed Rs. 173.22 billion to the national exchequer in terms of taxes, regulatory fees, initial and annual license fees, activation tax, and other charges during the first two quarters of the fiscal year 2020, according to Economic Survey 2019-20.



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