Telecom Sector Demands Cut in Advance Income Tax

The telecom sector claimed that advance income tax was making the affordability of mobile ownership and internet usage difficult especially for the low-income groups. Now, the telecom sector has asked the government to reduce the advance income tax in the budget 2022-23 proposal.

Telecom Sector Demands Cut in Advance Income Tax

“[The present] 15 per cent taxation was cutting into the profitability of the industry while hampering business case for network expansions and service improvements. It hampers the affordability of mobile ownership and internet services – critical for the entire population in this age, as well as economic growth of the country,” the industry said in the letter written to the Ministry of IT and Telecom.

Pakistan is among the highest-taxed telecom markets in the world. The overall 34.5pc tax on telecom users including 15pc advance income tax and 19.5pc GST makes the country second-highest in telecom taxation in South Asia.

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In FY 2021, the advance income tax was reduced from 12.5pc to 10pc for FY 2021 with a commitment to 8pc onwards vide Finance Act 2021. However, the move was taken back six months later, without due consideration to its long-term ramifications.

Through Finance (supplementary) Act, 2022, the AIT rate has been increased from 10pc to 15pc taking the overall tax on over 193 million telecom users to almost 35pc.

“As a policy, AIT under Section 236 of the Income Tax Ordinance, 2001 (ITO) should be abolished gradually given that it adversely affects the subscriber base falling below the taxable limit, and efforts should be focused on more direct taxation measures aimed at laconic, rather than expenditure on an essential service,” the sector stakeholders said in the letter.

The industry also urged the State Bank of Pakistan to remove the 100 per cent cash margin restriction on the import of telecom equipment.

“Telecom industry is totally dependent on its equipment to fulfil its quality of service and network coverage expansion obligations, as mandated by our respective licenses. Telecom equipment is not a luxury item,” the stakeholders said.

The industry also asked for the harmonisation of federal and provincial Sales Tax Laws.

See Also: Jazz, Telenor and Ufone Demand Reversal of 100pc Cash Margin Requirement for Imports