Telecom cellular companies will press the government for reversing the increase in withholding tax on telecom services as it has a huge impact of around Rs. 18 billion per year for the operators, it is learned.
The industry views it as detrimental to the digitalization drive for the economy and undermines the ‘Digital Pakistan’ vision. Sources in cellular companies told ProPakistani that detailed budget proposals would be shared once the new ministers for Information Technology and Finance assume their charge.
The previous government had announced a roadmap for the telecom sector in the last budget by reducing the withholding tax from 12.5 percent to 10 percent and was supposed to further reduce it from July 1, 2022, to 8 percent. However, the government later reversed its decisions in January 2022.
Sources said that it has huge implications for the telecom sector and the newly elected government would be requested to reduce the withholding tax.
Out of the population of 220 million, only around 2.9 million people file income tax returns in Pakistan, which is one percent of the total population. Even though a majority of the country’s population has a non-taxable income, these people are paying withholding tax, which they can never claim.
“The new government should ensure consistency in policies to facilitate investment in the telecom sector”, the official added.
Withholding tax at all levels should be made illegal via a Suo Moto action until the time FBR shows more than 75% repayment of excess taxes after tax returns are filed. Withholding tax is a unjust way of extracting money from honest tax payers because most of it is not returned back when found to be access of the tax liability.