Foreign Investors Urge Pakistan to Abolish Withholding Tax on Telecom Services
Latest reports claim that Foreign investors operating in Pakistan are urging the country to abolish the withholding tax on telecom services. According to them, the withholding tax inhibits the affordability of mobile services, which is essential for the entire population, particularly 70% of Pakistan’s population living below the poverty line.
Foreign Investors Say That Tax Hampers The Affordability of Mobile Services
It would not be wrong to say that telecom services play an important role in the country’s economic growth. Let me tell you that the Finance Act of 2021 decreased the advance tax on telecom services from 12.5% to 10% for the fiscal year 2021 and even to 8% for future years. Reports further claim that the Finance (Supplementary) Act of the same year raised the withholding tax rate from 10% to 15%.
The point worth mentioning here is that the increase in tax rates has a negative impact on the affordability of mobile services. Especially the poorest consumers, including women, are affected the most by reducing their ability to become mobile broadband subscribers.
Our country currently has the broadest gender gap in mobile ownership (34%) and mobile internet use (43%) compared to its regional counterparts. The higher costs imposed by sector-specific taxes on mobile services restrict the ability of low-income individuals, especially women, to access internet and data services.
Foreign investors recommend altogether abolishing the withholding tax on subscribers, as most of the subscriber base falls below the taxable limit. On the other hand, they propose reinstating the withholding tax reduction introduced through the Finance Act of 2021.
The complexities and hardships faced by the telecom sector due to distinct sales and service tax laws result in double taxation and unnecessary litigations, leading to difficulties for taxpayers. In order to address this issue, they want them to implement a single sales tax rate across all jurisdictions to provide the comfort of doing business for the telecom sector. They emphasize the need for telecom service sales tax rates to align with those applied to other services.
Foreign investors should draft a uniform service tax law to streamline compliance in different jurisdictions and create a more promising business environment for the telecom sector in Pakistan.
Also Read: Social Media Apps are Still Down Despite the Restoration of Internet Services – PhoneWorld
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