Increasing taxes on incoming calls from abroad seems to be yet another absurd move made by Pakistani authorities. The decision has been taken by the Ministry of Information Technology in order to amplify revenue and maintain parity in call rates. According to sources, the government will generate another $500 million each month through the imposition of this tax.
The government has also argued that grey-trafficking, which incurs it Rs23 billion in losses annually, will be eliminated with the imposition of this tax.
From such statements, it is obvious that the Pakistan Telecommunication Authority (PTA) has entirely failed in controlling the misuse of its resources on a technical basis, and is now relying on regulatory measures to recoup its losses.
Furthermore, the government must not make a case for extra revenue, given that its pockets are full of holes. When nothing is being done to stop tax evasion and corrupt practices, the justification for generating extra revenue becomes easy to shoot down. Similarly, as various sectors of the economy remain untaxed despite significant earnings, it makes no sense to increase the burden on those already in the tax net.
The authorities have also ignored the Competition Commission of Pakistan (CCP) in its decision to implement this tax. According to the CCP, the tax will encourage the formation of telecom cartels at the international level, and also pave the way for the uncompetitive gateway exchange proposed by the PTA. Therefore, it should be asked if generation of revenue takes precedence over a competitive environment. If it does, it opens a much larger debate on what is fair and unfair practice in our country’s economic policy.
Increasing taxes on incoming calls from abroad also has its political repercussions, and exposes the lip-service policy of those advocating expatriates’ rights in hopes of receiving greater foreign remittances. These overseas Pakistanis contribute $13.5 billion every year to the national economy, propping it up in times of distress.
Remittances are also one of Pakistan’s major sources of foreign exchange. On one side, the government promises to initiate schemes to encourage Pakistanis to remit money through official channels, and on the other increases the tax burden on the expatriates who will do so. It would do well to undertake a proper cost-benefit analysis of such decisions before hastily implementing half-baked ideas.
THE WRITER HOSTS BUSINESS TALK SHOWS ON FM 101 AND RADIO PAKISTAN AND IS PURSUING A MPHIL DEGREE IN ECONOMICS
Published in The Express Tribune, November 5th, 2012.