Telco’s demand decrease, restoration of tax exemptions in upcoming budget

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ISLAMABAD: Pakistan’s five renowned telecom companies have jointly approached the Ministry of Finance for streamlining of taxes and duties in the upcoming budget for financial year 2018-19.

The streamlining of taxes proposed by these companies include telecom imports, reported Business Recorder.

All the companies joining hands have submitted joint budget suggestions for FY 2018-19 to the Ministry of Finance which includes the recommendation of reducing/exemption of withholding taxes, decrease in customs duties and sales tax exemption on imports, decrease in federal excise duty and general sales tax etc.

The suggestions put forth jointly by the five leading telco companies included the decrease/exemption of withholding tax which they said was very high compared to other sectors.

It proposed since more than 70 percent of the population is below poverty levels and percentage of income tax filers less, the imposition of withholding taxes on total subscriber base was illogical, since majority of the users fall below taxable limit.

The telco companies said the decrease in withholding tax rates would help to enable increased usage of internet and data services for the majority low-income group. It recommended the withdrawal of withholding tax or it to be decreased to 8 percent or below.

Regarding imposition of federal excise duty (FED) and general sales tax (GST), which stood at 19.5 percent and 17 percent respectively for the telecom sector, the companies said the rates were higher compared to other sectors which stood around 15-16 percent.

It highlighted due to higher levels of sales tax on telecom services, majority of the users remained deprived of availing its benefits fully.

Furthermore, they proposed a reduction in customs duties and sales tax exemptions on import of telecom equipment.

They recommended the government should provide concessions in shape of decreased rates of customs duties and exemption of sales tax on imports of telecom equipment to enable increase in tele-density across Pakistan especially in far-off areas, where full benefits of next generation mobile (NGM) services could be availed by the populace.

The government in 2015 withdrew 5 percent customs duty and zero-rated sales tax regime on import of telecom equipment, which the telecom companies said had been increased to 5 percent to 20 percent and sales tax exemption withdrawn.

Cellular companies highlighted these respective tax increases had severely impacted the pace of growth and digital inclusion as it had contributed to the cost of doing business rising. These tax increases levied by the government, the companies said were restricting to raising network coverage across Pakistan.

They demanded the restoration of sales tax exemption and decrease in customs duties would enable them to maintain the necessary investments and help in roll out of 3G/4G services, which were still in its initial stages.