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KARACHI: The imposition of a new tax of 75 paisa on every 5 minutes on cellular call will be around 38 percent additional tax on the telecom consumer, industry sources said. The Federal Finance Minister Shaukat Fayyaz Ahmed Tarin has announced a new 75 paisa tax on mobile calls over five-minute duration. The announcement has perplexed the telecom sector and experts.

Currently, a five-minute long voice call usually costs approximately Rs 1.97 and after adding new Re 0.75 tax, the same call will now cost Rs 2.72. According to industry sources, the addition of 75 paisa on every 5 min call is around 38 percent additional tax burden on the telecom consumers of voice call.

Per minute cellular cost is 33 paisa and five minutes call charges are Rs 1.65 excluding taxes. After adding 32 paisa, the five minutes call cost is Rs 1.97, however after the imposition of new tax, its cost will reach Rs 2.72 per five minutes call. This new tax imposition comes after the government had already taken back its previous announcement regarding new taxes for the use of internet, SMS, and phone calls exceeding 3 minutes. The announcement has also caused confusion among the various segments of the society, which everyday dealings are dependent on phone and internet connectivity.

Industry sources said the new tax is being imposed without any consultation with the industry and there was even no consideration whether it would be practically possible to implement it and how it will affect the lowest segment of society who rely on voice calls to stay connected with their loved ones.

Aamir Hafeez Ibrahim CEO Jazz also expressed disappointment over the new tax on telecom sector. "Disappointed to see the imposition of some 40 percent additional taxes on price conscious voice customers, who typically do not have a smartphone or whatsApp to make calls," he tweeted. He also urged the federal government for reversal of this 'anti-poor' tax. As per the telecom industry, the implementation of this proposed tax is very difficult as the charging structure is not linear and is based on bundle offers to facilitate prepaid users which account for 98 percent of overall cellular subscribers in Pakistan. This regressive move will play havoc with the prepaid bundles being enjoyed by the lowest segment of society as the cellular operators will be constrained to remove such offers, making voice calling significantly more expensive.

In addition, users will quickly learn to redial before 5 minutes to defeat this proposed levy hence it may bring nothing to the government but add to the complexity for the telecom sector and operators while causing massive inconvenience to the citizens.

According to industry experts, this additional tax will also hit the poor who can't afford smartphones or internet connectivity. This mostly includes laborers and local domestic workers who move to larger cities from their villages, leaving their families behind in search of better paying working opportunities, and will now face difficulty affording basic phone calls back home.

Experts believe that this questionable tax doesn't necessarily encourage a digital future for Pakistan. A better approach is to increase mobile broadband and smartphone penetration so millions can come online and in return, the government can reap the socio-economic benefits brought upon by increased usage. Industry sources said taxes and fees on mobile consumers and operators in Pakistan are already among the highest in the world and any additional levy on telecom services would be detrimental to Pakistan's journey towards digitalization.

In general, telecom taxes are irrationally high in Pakistan as there is a 19.5 percent GST, the highest slab of GSTs in Pakistan and a 10 percent withholding tax. According to the PTA, the telecom sector paid Rs 125 billion to the national exchequer in terms of taxes, duties and levies during the fiscal year 2019-20.

Overall cellular subscribers are 183 million in Pakistan out of which 98 million use mobile broadband/Internet and 85 million only basic voice calls. As affordability of smartphones is the biggest barrier for the lowest segments of society to use mobile broadband.

It may be mentioned here that a substantial number of Pakistanis even now are dependent on 2G phones for everyday use, with only 99 million using 3G/4G services with 1-2 million fixed-line internet connections.

Copyright Business Recorder, 2021

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