ISLAMABAD: The Ministry of Information Technology and Telecommunication has proposed a “Tax Reforms Committee for Digital Financial Inclusivity” with clear objectives and timelines for articulating a “Smart Tax Plan”, a phase-wise and time-barred strategy intended to digitally-enhance economy all across the country.
The ministry has drafted “National Broadband Policy-2021” with dynamic tax system as one of its target.
The “Smart Tax Plan” will be submitted to the Ministry of Finance for approval, which may be ratified, and implementation will initiate in 4th quarter, 2021.
The draft policy stated that the government, while realising the significance of tax application and interconnectedness simultaneously, is of the view that timely achievement of national broadband targets would not only help in creation of new opportunities for economic development but will also allow authorities to increase their tax base and achieve new and fresh revenue targets.
The policy action on tax proposed that the Pakistan Telecommunication Authority (PTA) will conduct an impact analysis survey on various types of taxes, duties, and other charges applicable on internet user and the industry.
Identify direct/indirect impediments in service adoption and utilization, and develop a correlation among current tax regime, early digital inclusion of the people, and in achieving the strategic objectives for socioeconomic development.
Based on the outcomes of the survey, the PTA will propose its recommendations to the Ministry of IT and Telecom for further consideration.
The Ministry of IT and Telecom after reviewing the recommendations of the survey report, will organise a “Tax Reforms Committee for Digital Financial Inclusivity” comprising members from the Ministry of Finance, Ministry of IT and Telecom, federal/provincial tax authorities, the PTA, the FAB, the USF, the industry, and any other stakeholders it may deem appropriate with clear objectives and timelines for articulating a “Smart Tax Plan”, a phase-wise and time-barred strategy intended to digitally-enhance economy all across the country.
The tax review process will be prioritised into two parts with a narrow focus on inclusivity and affordability; each part shall be strategised and linked with national broadband targets and the broadband for sustainable development programme of the Universal Service Fund (USF), so as to extend benefits to the most deserving faction of the society.
The plan may be built on a hybrid approach i.e. short-term subsidies and continuing relief programme for sustainable digital financial inclusion and shall be harmonised through all federal/provincial tax authorities.
The PTA will conduct the survey and submit its recommendations to the Ministry of IT and Telecom before June 2021 for further consultation and development of “Smart Tax Plan”, which will be submitted to the Ministry of Finance for further approvals.
The plan may be ratified and implementation will initiate in 4th quarter, 2021.
The plan may propose gradual normalisation of Advance Income Tax on telecom services (voice and internet for both fixed and mobile) considering telecom services as an essential utility service and harmonisation of sales tax in provinces and the FED in federal territory on telecom services i.e. single and market aligned GST rate across the country.
Further, the resolution of SIM issuance tax, Rs 250 against the issuance of every new SIM, introduction of simplified advance tax mechanism u/s 147 of ITO, 2001, for telecom and exemption from all withholding/collection provision under ITO, 2001, is recommended.
Similar exemptions have already been afforded in the banking and oil industries, it added.
Inclusion of telecom sector (all the PTA licensees) in Division III of Part III of the Income Tax Ordinance to grant relief of three percent minimum tax instead of eight percent tax, abolishment of additional customs duty (four percent) and regulatory duty (nine percent) on the network equipment imported by telecom companies excluding smartphones which is subject to Mobile Device Manufacturing Policy, additional customs duty and regulatory duty on raw material for manufacturing of optical fibre cable may be brought down to five percent and three percent, respectively.
Inclusion of telecom operators (licensees of the PTA) in the definition of industrial undertaking by the FBR under section 2 (29C) of Income Ordinance 2001 may be proposed.
Copyright Business Recorder, 2021