Green signal: ECC clears telecom policy, refuses industry status

Sector’s efficiency likely to improve, but tax burden remains in place

ISLAMABAD:

The government on Friday approved a new telecommunication policy to improve the sector’s efficiency and service delivery but refused to give the status of industry, which it desperately needs to get relief from heavy taxes.

The Economic Coordination Committee (ECC) of the cabinet, in a meeting chaired by Finance Minister Ishaq Dar, approved the Telecommunication Policy 2015, said the Ministry of Finance.

Under the policy, the government has allowed provision of Wi-fi in-building, in-vehicle and external commercial hot spots and relevant rules of the Pakistan Telecommunication Authority (PTA) have been amended.

In August, the ECC had put off approval of the policy after the Federal Board of Revenue (FBR) objected to the proposal of giving industry status to the telecom sector. Now, the FBR’s argument has been accepted.

Had the sector won the industry status, its tax obligations in terms of customs duty, sales tax and income tax would have been significantly reduced.

The industry, on the other hand, is allowed goods and machinery import at reduced rates. Its minimum turnover tax is also 1%, far lower than what the telecom sector is paying.

The telecom sector is one of the main revenue spinners for the FBR.

“The industry status has not been awarded due to fiscal implications,” said Anusha Rahman, Minister of State for Information Technology, while talking to The Express Tribune. The ministry would continue its efforts to win the industry status, she said.

The government has provided a clear path to the information technology sector for the next five years, as the policy covered both demand and supply sides of the business, the minister said.

She said the policy would aid efforts to bring an end to grey traffic, adding the regular traffic had already increased significantly from just 400 million minutes to 1.575 billion minutes. “The policy will create more business opportunities, helping to create more jobs.”

Telecentres will be set up for the first time and they will grow phenomenally in coming years, which will increase the telecommunications coverage in under-served areas.

The policy will not have any impact on the proposed merger between Mobilink and Warid. Their parent companies have announced the merger, subject to regulatory approvals over the next six months.

The telecommunication sector was deregulated in 2003 through the deregulation policy. Subsequently, in 2004, mobile cellular and broadband policies were introduced for five years, but these could not be revised during the term of the previous government, said the finance ministry.

The policy is aimed at availability of universal, affordable and quality telecommunication services through open, competitive and well-managed markets. It includes various new elements like competition framework, spectrum strategy, spectrum sharing, satellite communications, over-the-top services and convergence, which were not present in previous policies.

It is expected the competition framework will make the telecom market more efficient in terms of quality of service and choice of services available to the consumers. The framework will be prepared in the next six months while the new licensing regime will be implemented in one year.

A major new element of the policy relates to provision of wholesome treatment for frequency spectrum management.

The Universal Service Fund will be utilised for providing telephone, internet, broadband services and establishment of telecentres in under-served and unserved areas.

The policy will promote efficient markets with straightforward entry and exit of qualified enterprises that have sufficient financial resources to invest and deliver quality services. The PTA will review the markets and determine the market power of Pakistan Telecommunication Company Limited and other operators.

Published in The Express Tribune, December 12^th, 2015.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.