Rise in advance tax on cell phone users under consideration

KARACHI: The federal government is considering increasing the advance tax on telecom users to earn more revenue.

Industry sources said that the Federal Board of Revenue (FBR) has proposed a 50 percent increase in taxes on telecom users in the upcoming mini-budget, which will end some tax exemptions that were presented in the federal budget in June of this year.

Advance tax on telecom services was reduced from 12.5 percent to 10 percent in the federal budget of FY22. The government also decided to further cut the advance tax on telecom users by 2 percent to 8 percent in fiscal year 2023. This move was welcomed by the public and stakeholders.

However, now it seems the government is ready to go back on its decision to get more revenue in the second half of this fiscal year and a five percentage point increase in advance tax is on the cards.

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If the proposal is implemented, this five percentage point increase will take the telecom advance tax to a historic high of 15 percent.

Sources said that after the endorsement of the finance adviser, the proposal will be presented before the federal cabinet for approval.

They said that the current economic conditions have proved challenging for masses as inflation has reached record highs of 11.5 percent, petrol prices have broken records and common household items remain out of reach for daily wagers. In this scenario, an increase in mobile phone users spells more trouble for the already overburdened citizens.

They said that advance tax on an essential service is not justifiable as a large majority of mobile phone subscribers fall under the non-taxable bracket. Out of 187 million mobile phone users, some 98 million are prepaid and these consumers have no means to claim back the advance tax they are paying.

It is pertinent to mention here that stakeholders have already requested the government to support the Digital Pakistan agenda through tax reductions. Experts claim that high taxes may hurt the Digital Pakistan vision, as millions could not afford mobile phone services.

Copyright Business Recorder, 2021