Telecom Tax Dispute Escalates to SIFC for Resolution
The ongoing tax dispute between Long Distance and International (LDI) telecom operators and provincial governments has now been referred to the Special Investment Facilitation Council (SIFC) for resolution. According to sources from the Ministry of IT and Telecommunication, concerns over provincial taxation policies have led LDI operators to challenge the legality of these taxes, bringing the issue to a national level.
Telecom Tax Dispute Escalates to SIFC for Resolution
The Core of the Dispute
LDI operators, who provide international incoming and outgoing voice services, argue that the taxes imposed on international incoming services by provincial governments exceed their constitutional authority. This tax dispute has persisted for years without a clear resolution, causing friction between the telecom operators and the provincial authorities. With the inability to reach a consensus, the Ministry of IT has escalated the issue to the SIFC, hoping to find a solution through their intervention.
In addition to the tax-related concerns, LDI operators also face challenges regarding the expiration of their licenses, most of which lapsed between July and August 2024. This issue, combined with their outstanding payments to the Universal Service Fund (USF), has added further complexity to an already difficult situation.
Provincial Governments’ Stance
On the other hand, the Ministry of IT and provincial governments defend the taxes, claiming they align with international practices. During discussions at SIFC, the Ministry suggested that an impartial entity should conduct due diligence to work with all stakeholders, including LDI operators, provincial governments, and the Federal Board of Revenue (FBR). The aim is to find a workable solution that satisfies all parties.
To address the legal aspects of the dispute, the Ministry of IT recommended that the Law Division and the Attorney General of Pakistan (AGP) carefully review both domestic and international regulations related to telecom taxation. The Ministry emphasized that a clear legal interpretation is necessary for moving forward and resolving the matter once and for all.
National Cloud Policy and Additional Developments
During the SIFC discussions, the Ministry of IT also provided an update on the National Cloud Procurement Framework. The governments of Khyber-Pakhtunkhwa (K-P), Gilgit-Baltistan (G-B), and Azad Jammu and Kashmir (AJK) also adopted the framework. However, AJK and G-B have not yet fully implemented the Cloud Policy. AJK was asked to submit a milestone-based timeline for adopting the Cloud Policy, while G-B has been urged to expedite the approval of its draft policy. The Cloud Procurement Framework, officially notified in May 2024, aims to improve IT infrastructure across provinces by fostering cloud adoption.
Challenges in the Telecom Industry
The telecom industry in Pakistan continues to face numerous challenges. The imposition of taxes on smartphones by the previous government, coupled with heavy taxation on telecom operators, has placed additional strain on the sector. The recent sale of Telenor to PTCL has further highlighted ongoing issues within the industry.
Government policies, such as linking license renewal fees to the dollar exchange rate, have also negatively impacted the telecom sector. This policy, in particular, contributed to the lack of participation by most telecom operators, except Ufone, in previous spectrum auctions.
Heavy taxation remains a significant obstacle, complicating efforts to resolve the industry’s other pressing challenges. As the telecom sector continues to evolve, finding balanced solutions through platforms like the SIFC will be crucial for ensuring its sustainable growth and development.
See also: PTA Finalizes MVNO Framework: A New Era for Pakistan’s Telecom Industry
