Govt eyes major tax relief for telecom sector in FY27 budget: sources

ISLAMABAD: The government is actively considering significant tax relief measures for Pakistan’s telecom and broadband sector in the upcoming federal budget for FY2026-27, including a major reduction in import duties on fiber optic cable and a possible cut in taxes imposed on internet services, as part of efforts to accelerate digital connectivity and prepare the country for 5G deployment.

According to informed sources, policymakers are evaluating a proposal to slash the current cumulative duty and tax structure on fiber optic cable imports from nearly 60% to around 5% in a bid to encourage telecom operators and internet service providers to rapidly expand Fiber-to-the-Site (FTTS) infrastructure nationwide.

At the same time, the government is also reviewing options to reduce taxes on internet services to make broadband more affordable for consumers under the broader “Digital Pakistan” vision. Currently, internet users pay approximately 19.5% in provincial taxes in addition to a 12.5% federal withholding tax, significantly increasing end-user costs.

Industry stakeholders have repeatedly argued that the existing tax regime on telecom infrastructure and internet services has slowed broadband expansion and limited digital inclusion, particularly in underserved areas.

Sources said the proposed reduction in fiber optic duties is aimed at lowering infrastructure deployment costs and accelerating fiberisation, which is considered critical for the successful rollout of next-generation 5G services in Pakistan.

Telecom experts maintain that without large-scale fiber network expansion, the country may struggle to fully realise the commercial and technological potential of 5G connectivity.

Officials familiar with the ongoing budget consultations said easing the tax burden on digital services is being considered to stimulate internet adoption, support the growth of Pakistan’s IT and freelancing sectors, and improve access to affordable high-speed internet.

“The government recognises that affordable broadband and strong digital infrastructure are essential for economic growth and future competitiveness,” a senior official familiar with the discussions said, adding that final decisions would be made during the FY2026-27 budget deliberations.

Telecom industry representatives have welcomed the possible measures, saying lower import duties and reduced internet taxation could attract fresh investment in broadband infrastructure, improve service quality, and expand connectivity across the country.

The upcoming federal budget is expected to place increased focus on digital infrastructure development as Pakistan moves toward future spectrum auctions and eventual commercial 5G deployment.

Upon discussing the matter with Wireless and Internet Service Providers Association of Pakistan (WISPAP) Chairman Shahzad Arshad, he described the reported developments as a highly encouraging and progressive step for the telecom and internet industry of Pakistan.

He stated that if the government proceeds with reducing import duties on fiber optic cable and lowering taxation on internet services, it would significantly accelerate broadband expansion, improve affordability for end users, and strengthen the foundation for 5G and future digital infrastructure.

He further added that such policy decisions would represent a major leap forward towards achieving the goals of the Digital Pakistan initiative by enabling wider access to reliable, high-speed internet connectivity across urban and rural communities alike.