30% population still without 4G, telecom industry seeks budget relief

ISLAMABAD: Pakistan’s telecom industry has sought sweeping tax and duty relief measures in the FY2026-27 federal budget, arguing that high taxation and rising infrastructure costs are slowing broadband expansion, with more than 30% of the population still outside 4G coverage despite growing digitalization needs. 

In budget proposals submitted through the Telecom Operators’ Association to the Ministry of Information Technology and Telecommunication (MoITT), the industry recommended major reductions in taxes on telecom operators and consumers, abolition of customs duties on 5G and telecom equipment, and a sharp reduction in duties on optic fiber cable imports. 

The proposals stated that Pakistan’s telecom sector continues to face mounting pressure from high taxation, currency depreciation, rising operational costs and increasing investment requirements for network expansion and next-generation technologies. 

According to the industry, over 30% of Pakistan’s population remains uncovered by 4G services, while around 12% still lacks access even to basic mobile signals. Fixed broadband penetration remains below 2%, among the lowest globally, whereas telecom consumer taxation in Pakistan stands at 34.5%, one of the highest rates in the region. 

The telecom industry proposed reducing withholding tax under Section 153 of the Income Tax Ordinance, 2001 from 6% to 4% and making the tax adjustable instead of treating it as minimum tax.

Operators also sought extension of the carry-forward period for turnover tax credits under Section 113 from two years to five years. 

According to the proposal, the current taxation regime creates significant cash flow constraints and raises the cost of capital for telecom operators, limiting long-term investment in infrastructure and restricting network expansion into underserved areas. 

The industry also proposed reducing advance income tax on telecom services under Section 236 from 15% to 8%, arguing that high taxation on mobile usage disproportionately affects low-income and prepaid consumers and suppresses digital adoption. 

The proposals noted that the tax had previously been reduced under an Economic Coordination Committee (ECC) decision before being increased again through the Supplementary Finance Act 2021.

Telecom operators maintained that reducing consumer taxation would improve affordability, increase usage and support broader digital and financial inclusion. 

In another major recommendation, telecom operators sought abolition of customs duties on imports of 5G and fixed-line telecom equipment, including smartphones, servers, batteries, SIM cards, network infrastructure and related telecom components. 

The industry argued that high import duties have significantly increased deployment costs and slowed the rollout of next-generation technologies, particularly in rural and underserved regions. 

According to the proposal, rationalization of duties could unlock nearly Rs12 billion in additional capital deployment for network expansion and digital infrastructure development. 

The telecom sector also recommended reducing overall duties and taxes on optic fiber cable imports from around 67% to 5%, stating that elevated taxes, global supply shortages and higher freight costs have become major obstacles to broadband expansion in Pakistan. 

According to the proposal, rationalizing optic fiber cable taxes would accelerate fiber rollout, improve broadband quality and support fixed broadband penetration across the country. 

The industry further sought withdrawal of the Commissioner’s authority under Section 147(6B) of the Income Tax Ordinance, 2001 to reject taxpayers’ advance tax estimates, arguing that the mechanism increases litigation, compliance costs and business uncertainty. 

Positioning the recommendations within Pakistan’s broader digital economy agenda, the telecom industry maintained that a more sustainable investment environment would help accelerate broadband penetration, digital inclusion, financial digitization and economic growth. 

The proposals also cited studies suggesting that a 10% increase in broadband penetration can increase GDP per capita by around 2%, highlighting the telecom sector’s growing importance in Pakistan’s economic landscape.