Higher taxes mean lower purchasing power of an average consumer. (Groupe Spéciale Mobile) Association (GSMA) has set out a number of measures that Pakistan will need to take in order to ensure that it reaches its Vision 2025 goals and thus reduce the divide that exists in the telecom sector.
A white paper prepared by GSMA Intelligence revealed that only 47pc of the population subscribes to a mobile service, and only 10pc subscribe to a 3G or 4G data service.
According to a market forecast, the number of subscribers will only grow by 5pc by the year 2020. Almost 48pc of the population is expected to be without mobile subscription in 2020.
In a recent survey of 1000 Pakistanis, 57pc of the people owning a mobile phone do not subscribe to data service because they cannot afford a smartphone. 42pc of the sample population surveyed cited the high cost of subscribing to a mobile data package as the major inhibitor.
Henry Parker, Public Policy Manager, Asia Pacific, GSMA said that the mobile broadband market is growing in Pakistan and the government is taking the right decision by investing in new networks in rural areas of the country. However, he urged that the services should be made affordable by way of reducing taxes so that more people could use mobile phones and internet service on the phone.
The GSMA has made three primary recommendations for consideration as part of the upcoming budget. They aim to ensure that mobile usage is taxed in the same way as other goods and services, and that mobile is not singled out for high rates as if it were a ‘luxury’:
- Reduce sales tax/FED on mobile to 17pc
At present, sales tax and federal excise duty (FED) are charged at higher rates (18.5-19.5pc) for mobile services than other services. The rates should be reduced to 17pc. This would help to make services and phones more affordable for all levels of society.
- Abolish the SIM Tax
The Rs 250 SIM Tax places a cost barrier in the way of acquiring a mobile phone and is imposed regardless of ability to pay. It should be removed.
- Reduce Withholding Tax on Mobile to 12pc
Mobile consumers pay more withholding tax than consumers in any other sector. Many cannot reclaim what they pay since they don’t file a tax return. This tax measure makes mobile phones less affordable for the low income group. It should be reduced and reformed.
Parker said that the benefits of tax reforms would not only be limited to the consumers only but will help grow the economy as a whole by aiding job creation and increased investment etc. Such a reform could add $2.8b in additional GDP growth by the year 2021, he added.
