Ministry urges tax relief extension for telecom sector

The Ministry of Information Technology and Telecommunication (MoITT) has proposed a comprehensive package of fiscal incentives for the telecom sector, including exemption from withholding tax, reduction in import duties on telecom equipment and lower taxes on mobile handset components, aimed at attracting fresh investment, creating employment opportunities and improving digital connectivity across the country.

According to informed sources, the ministry has urged the government to extend tax relief measures to the telecom industry, arguing that the sector has emerged as a critical component of Pakistan’s digital economy and can play a pivotal role in supporting economic growth and technological advancement.

The ministry maintained that the telecom sector has invested approximately $5 billion over the past five years and contributed around Rs1.7 trillion to the national exchequer in taxes during the same period. The industry currently contributes nearly Rs400 billion annually in taxes and serves around 200 million subscribers across the country.

Sources said the ministry has highlighted the sector’s strong tax compliance record and recommended that telecom sector be exempted from the existing 6 percent withholding tax, which is collected in advance and subsequently adjusted through a lengthy reconciliation process.

Officials argued that the current mechanism places an unnecessary financial burden on operators by requiring them to pay taxes upfront, often months before final tax assessments are completed.

“The telecom sector is fully compliant with tax laws and regulations. There is a strong case for exempting it from withholding tax to improve liquidity and encourage further investment in network expansion and technological upgrades,” an official said.

The ministry has also pointed to the sector’s recent commitment of $510 million for the acquisition of spectrum intended to support the rollout of next-generation mobile services, including 5G technology.

In another major proposal, the ministry has recommended a reduction in the tax burden on imported telecom equipment to facilitate the timely deployment of network infrastructure and the introduction of advanced digital services.

The proposed relief covers a range of levies, including customs duties, additional customs duties and regulatory duties imposed on telecom equipment imports.

Officials noted that regulatory duties are traditionally applied to luxury or non-essential items, whereas telecom infrastructure and digital connectivity have become fundamental requirements for economic development, business operations, education, healthcare and public services.

“The telecom sector can no longer be treated as a luxury industry. Digital connectivity is now an essential service and a key enabler of economic activity,” sources quoted ministry officials as saying.

The ministry has further proposed lowering taxes and duties on components used in the local manufacturing and assembly of mobile handsets to make smartphones more affordable for consumers and support the government’s objective of increasing digital inclusion.

According to officials, reduced taxation on handset components would strengthen domestic manufacturing, encourage investment in the mobile device ecosystem, generate employment opportunities and improve access to affordable smartphones, particularly for lower-income segments of society.

Industry stakeholders have long argued that Pakistan requires a more investment-friendly tax regime to expand broadband coverage, improve service quality and prepare for the transition to 5G services.

The ministry believes that a combination of tax incentives, lower import costs and support for local manufacturing would help accelerate digital transformation, attract foreign and domestic investment and enhance the sector’s contribution to the national economy.