ISLAMABAD: Telecom sector has contributed an amount of Rs. 745 billion to national exchequer in terms of regulatory duties and taxes during last five years.
A higher contribution of Rs. 243.8 billion was made during 2013-14 due to Pakistan Telecommunication Authority's (PTA) extraordinary deposits of Rs. 96.5 billion out of total value of 3G and 4G spectrum auction in April 2014.
In 2014-15, telecom sector contributed Rs. 126.6 billion to national exchequer in terms of regulatory duties and taxes.
The sector is a significant source of revenue generation for government in terms of initial and annual license fees, initial and annual spectrum fees, Universal Service Fund (USF) and Research and Development (R&D) Fund contributions, Access Promotion Contribution (APC) for USF, Numbering Charges, license application fee etc. and taxes including General Sales Tax (GST)/Federal Excise Duty (FED), SIM Activation Tax, Advance/Withholding Tax (WHT), sales tax on mobile handsets, custom duties and other taxes.
PTA's annual report on Tuesday said overall telecom sector taxes and levies in Pakistan are considered higher compared to taxes on telecom services in comparable countries. Further, GST (19.5% in Punjab and Khyber Pakhtunkhwa, 18 % in Sindh and 18.5 % in rest of Pakistan) and WHT (14 %) on telecom services are much higher as compared to average 16 % GST and 10 % WHT in other sectors.
In addition, the report said in 2015-16 budget, governments of Punjab, Sindh and Khyber Pakhtunkhwa have imposed GST on data/internet services in range of 18-19.5 %.
The government of Punjab has recently indicated to withdraw internet tax in Punjab that would have positive impact and it is expected that rest of the provinces will also follow suit.
PTA and telecom industry believe that rationalization of taxes on telecom sector will result in enhanced sector growth which may lead to better collections for government levies in the long run.
In this regard, telecom industry has submitted tax proposals to the government for consideration and these included:
The government is currently charging WHT @ 14 % from telecom consumers which is unjustified because most of the consumers are poor and below the minimum threshold requirement of Rs. 400,000 for filing a tax return and hence non-tax filers. They are, therefore, unable to claim advance income tax at the end of fiscal year.
Therefore, WHT tax deduction system on telecom services needs to be reviewed by Federal Bureau of Revenue (FBR) and rationalized in order to save poor people from undue taxation.
Regarding Activation Tax on Issuance of SIMs, the government charges Rs. 250 as activation tax that was imposed in lieu of Custom Duty back in year 2000. However, currently the government charges custom duty on import of mobile handsets in addition to activation tax. The cellular operators are of the view that activation tax should be abolished to avoid double taxation.
Industrial Undertaking Status: Telecom sector has still not been granted the industrial undertaking status by FBR. In the absence of industrial status, mobile operators are unable to adjust the income tax paid at the time of import of telecom equipment, which is treated as a final tax liability.
Therefore, Industrial undertaking status needs to be given to the telecom sector, which was also agreed by FBR and Ministry of Finance.
Comments
Comments are closed.