Telecom firms asked to justify lower tax revenue impact

ISLAMABAD: The Senate Standing Committee on Finance and Revenue asked the Telecom Operators’ Association (TOA) to provide written justification for its claim that reducing the advance tax on telecom services from 15 percent to 8 percent would lead to an increase in government revenue.

The Committee met under the chairmanship of Saleem Mandviwalla. The Association proposed a cut in the WHT rate from 6 percent to 4 percent and a carry-forward of turnover tax from 2 years to 5 years to let the industry flourish. The increase in WHT from 4 percent to 6 percent has significantly raised the cash flow issues for operators.

Further, due to low average revenue per user in Pakistan, the payback period of the telecom sector is very low. So limiting the credit to 2 years is not suitable for loss-making companies. Resultantly, this tax has increased the tax cost of telecom operators.

They further proposed the reduction of advance income tax on mobile usage. They said that lower taxes will make the services more affordable and improve mobile penetration, which will result in more tax collection and digitisation.

The committee, which was also backed by the Finance Minister, sought an explanation in writing from the operators.

TOA acknowledged the government’s efforts to maintain macroeconomic stability while supporting Pakistan’s long-term development priorities. The association believes the budget contains several positive measures that reflect the government’s continued recognition of the importance of digital connectivity and the digital economy.

However, the association noted that its longstanding request to reduce the tax burden on mobile consumers remains unaddressed. Mobile users continue to face a 19.5 percent General Sales Tax (GST) and a 15 percent advance withholding tax on telecom services, making connectivity less affordable for millions of Pakistanis.

With approximately 206 million mobile subscribers but only 7.7 million active taxpayers in the country, the vast majority of consumers is below the taxable income threshold and therefore has no practical mechanism to recover the 15 percent advance withholding tax deducted from their mobile usage.

TOA particularly appreciates measures that support investment, affordability, and digital adoption. These include the government’s indication to reduce customs duties on raw materials for local production of handsets, subject to enactment through the Finance Bill, which would improve device affordability and accelerate connectivity.

The association also welcomes the rationalisation of the super tax, which will help strengthen the investment environment and support growth across Pakistan’s digital economy.

Building on these positive steps, TOA remains optimistic that additional reforms proposed by the industry can also be considered as part of the government’s broader digital transformation agenda. These proposals include rationalising advance and withholding taxes applicable to telecom services and mobile users, which would further improve affordability, expand digital adoption, and encourage greater investment across the sector.

TOA also hopes that ongoing policy discussions will consider additional measures to support broadband expansion and long-term digital infrastructure investment. These include rationalising duties on optical fiber infrastructure, which is essential for expanding broadband networks, accelerating fiber deployment, and preparing Pakistan for future connectivity requirements.

The Association also looks forward to continued progress on reforms that enhance tax certainty, reduce administrative discretion, and further improve the ease of doing business, helping create an even stronger environment for investment and growth.

TOA stressed that such reforms are particularly important given telecom’s role as the foundation layer of Pakistan’s digital economy. Reliable and affordable mobile connectivity supports financial inclusion, education, healthcare, e-commerce, agriculture, manufacturing, and public service delivery, while providing the infrastructure upon which emerging technologies and digital services are built.

Sustained investment in telecom infrastructure is therefore essential not only for sectoral growth but also for the country’s broader economic competitiveness and digital future.

Kamal Ahmed, Secretary General, TOA, said: “Telecom is an enabling industry that powers digital transformation across the entire economy.

Policies that improve affordability, encourage investment, and accelerate infrastructure deployment generate benefits far beyond the sector itself, supporting productivity, innovation, financial inclusion, and economic growth. We welcome the positive measures introduced by the government and are encouraged by the direction reflected in the budget.

We remain hopeful that the government will also consider the additional reforms proposed by the industry, which can further accelerate digital adoption, investment, and Pakistan’s broader digital growth agenda.”

Copyright Business Recorder, 2026