GSM Association Urges Pakistan to Withdraw Increase in WHT on Telecom Services

The Global System for Mobile Communications Association (GSMA) has requested the Government of Pakistan to withdraw, as soon as possible, the increase made to the withholding tax (WHT) on the telecommunication services under the Finance (Supplementary) Bill 2021.

In a letter addressed to Finance Minister, Shaukat Tarin, Miniter for IT and Telecom, Syed Amin Ul Haque, and Chairman Federal Board of Revenue (FBR), Dr. Muhammad Ashfaq Ahmed, the GSM Association lamented that the increase in tax on mobile services was damaging the economy.

The GSM Association remarked that Pakistan’s mobile industry had great potential, yet the present levels of mobile internet acceptance, smartphone penetration, and digital services usage fall behind those of other nations in the region. It predicted that by 2023, the economic contribution of the mobile industry in Pakistan could reach $24 billion, accounting for 6.6 percent of GDP.

The GSM Association appreciated the Pakistani government for implementing the tax reform proposals included in the Finance Bill 2021-22 which were approved by the federal cabinet. “It was heartening to see the government announcing the reduction of withholding tax (WHT) from 12.5 percent to 10 percent in this year’s budget and [a] further reduction to 8 percent in the next financial year,” the letter read.

On the flip side, the association opined that raising WHT from 10 percent to 15 percent under the new Finance (Supplementary) Bill 2021 would create a regressive barrier for end-users to access mobile services and disproportionately affect the poorest, as it will be more difficult for them to claim these payments as an advance tax.

It warned that this rise in sector-specific taxes would hinder adoption and innovation, thereby jeopardizing long-term industry growth and the country’s net economic benefits. Removing the withholding tax would improve low-income people’s access to telecommunication, it added.

The GSM Association highlighted that the pandemic had shown how connectivity was so crucial. It said that the need for connectivity would continue to be even more essential in the future. “Due to the negative impact of this increased tax levy, the situation presents a significant risk of the government achieving the Digital Pakistan Vision,” it added.