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ISLAMABAD: The Global System for Mobile Communications (GSMA) has stated that the reversal of 2021-22 tax reforms in the mini-budget for mobile services is damaging to the economy, besides this regressive tax creates a barrier to access mobile services.

The GSMA in a letter written to Shaukat Tarin, Federal Minister Finance and Revenue, Dr Muhammad Ashfaq Ahmed, Chairman, Federal Board of Revenue (FBR), Syed Aminul Haque, Federal Minister Ministry of IT and Telecom, and Amir Azeem Bajwa, chairman, Pakistan Telecommunication Authority has expressed its concern regarding the reversal of the tax reforms in the 2021-22 Finance Bill by increasing WHT from 10 percent to 15 percent in the mini budget that has been approved by the cabinet.

The GSMA, the global mobile industry association uniting more than 750 operators, plays an important role in supporting countries with their transition towards a digital economy. In collaboration with regulators, policy- makers and the wider digital sector, the GSMA contributes to tax policy dialogues at a national and global level.

The telecommunication sector is a key enabler for social and economic growth and Pakistan’s mobile market has significant potential, but current levels of mobile internet adoption, smartphone take-up and usage of digital services lag behind those of other countries in the region.

By 2023, it is projected that the economic contribution of the mobile industry in Pakistan could reach $24 billion, accounting for 6.6 percent of GDP.

The GSMA commends the Government of Pakistan for adopting the tax reform measures approved by the Federal Cabinet for the Finance Bill, 2021-22. It was heartening to see the government announcing the reduction of withholding tax (WHT) from 12.5 percent to 10 percent in this year Finance Bill 2021-22 and further reduction to eight percent in the next financial year.

This regressive tax creates a barrier to access mobile services and affects the poorest the most as it will be more difficult for them to claim these payments as an advance tax. This increase in sector-specific tax will stifle adoption and innovation, which fetters sustainable industry growth and the net economic benefits to the country.

Removing this withholding tax would promote accessibility to connectivity to the low-income group.

Pakistan has the widest gender gap in mobile ownership (34 percent) and mobile internet use (436) as compared to its regional peers.

Sector-specific taxes, such as those on smartphones and data usage, influence retail prices and may have a strong impact on the poorest consumers especially women, lessening their ability to become mobile broadband subscribers.

Connectivity has never been more important as the pandemic has highlighted its need and will continue to be even more essential moving forward.

Due to its negative impact this increased tax levy presents a significant risk of the government achieving the Digital Pakistan Vision.

The GSMA urged the Government of Pakistan to consider the removal of this increase in the withholding tax from the mini budget.

The GSMA stated that it remains available to engage further.

Copyright Business Recorder, 2022

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