Taxing incoming calls from abroad

Published: November 5, 2012

According to sources, the government will generate another $500 million each month through the imposition of this tax.

KARACHI: 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.

 

on Twitter, become a fan on Facebook

Reader Comments (16)

  • Haroon Rashid
    Nov 5, 2012 - 10:05AM

    In agreement with Mr. Chaudhry on cartelisation against industry norm in important technology sector sector of ICT. Mr. Chaudhry as you know this will encourage grey termination which earlier has lost its glamour, and formation of wealth as group of money laundrers, and be classed in the category of Cyber Crime.
    The auction of 3G was to arrange liquidity for the deficit of IMF default, which will be further delayed if this ICH takes place.
    Many international investors eyeing Pakistan for potential investment in new licenses in telecom sector from the Russian Federation, the EU, Japan with its acquisition of Sprint by Softbank. and STC from Saudi Arabia, Du from UAE, and encouraging further investment by China Mobile.
    In my meetings recently with various international operators at World Telecom 2012 with the Secretary General has reservations for Pakistan.
    ITU’s policy guideline is very clear on everything, and the GSR is very clear on guideline on such program.

    Recommend

  • saqib khwaja
    Nov 5, 2012 - 10:57AM

    it makes no sense to increase the burden on those already in the tax net ?

    The people living abroad don’t pay any taxes to begin with.

    Recommend

  • S K Afridi
    Nov 5, 2012 - 1:18PM

    When prices of daily use commodities are soaring in Pakistan and no political party is raising its voice against Government of Pakistan’s cruel attitude towards the masses, why the politicians and others are so concerned about additional tax on telephone calls from abroad which has no significant effect on the lives of our people.

    Recommend

  • Analyzer
    Nov 5, 2012 - 1:32PM

    The author seems confused. On one hand he agrees that the ICH “will generate another $500 million each month”, that “grey-trafficking, which incurs Rs23 billion in losses annually, will be eliminated” and that the “decision has been taken by the Ministry of Information Technology in order to amplify revenue and maintain parity in call rates”, yet in conclusion he is opposed to implementation of the ICH. Sorry mate, while the ICH makes sense to me (both economical and logical), your article does not.

    Recommend

  • Pro Truth
    Nov 5, 2012 - 2:45PM

    Utter non sense, Pakistan should be a country to encourage foriegn calls into and out of the country, more restrictions will create less calls and less revenue. As people who do business and diaspora who make calls to Pakistan will cut the time of calls or switch to VOIP calling with skype and other options. People will still talk but government will not make any money out of and in the process create an image that Pakistan is not open for business. On the same note, if interconnect to Pakistan made expensive by these taxes, calls from Pakistan to other countries will also get dearer with reciprocal charges slapped by those countries.

    Looks like when telco is getting cheaper worldwide, Pakistan is taking backward steps!

    someone mentioned here Overseas Pakistanis dont pay taxes, for information, People including overseas Pakistanis living in rest of the world pay taxes to the tune of 40%-50% of their income. After paying such taxes they still manages to save and send back $13 billions a year to Pakistan reserves ( which is way more than what all Pakistanis collectively pay income tax in a year!)

    Recommend

  • Dr Jamshed Khan
    Nov 5, 2012 - 4:03PM

    @saqib khwaja:
    You need a good lesson on tax regulations. The author of this report has made a good point. First the governtment need to close the holes in their pockets before raising taxes.

    Recommend

  • Mudasar
    Nov 5, 2012 - 10:36PM

    @saqib khwaja:
    yet they act as a vertebral column for the crumbling country’s economic. (billions of dollars of remittance every year—to begin with)
    also to begin with, how much tax do you guys pay? Also to begin with how much tax your leaders pay????????

    Recommend

  • Expat in Oman
    Nov 6, 2012 - 12:50AM

    I am living in Oman, now swithed to Skype, and will not make my share in remittance to Pakistan, but now onwards remit my savings to Pakistan in the form of gold or any other form instead of banking channel. I also suggest all of my expat friends donot use banking channels for remittance. When beuracrates/politicians in Pakistan are not ready to look after us but to churn money from us for their luxurious life style, than why should we care for them.

    Recommend

  • Mudasar
    Nov 6, 2012 - 1:46AM

    @saqib khwaja:
    Just in case you are not aware, calling India is 1.9 cents/min and calling Bangladesh is 3.9 c/min, now compare calling pakistan at 12 c/min.

    Recommend

  • S K Afridi
    Nov 6, 2012 - 2:25PM

    @Expat in Oman:
    You have every right to keep your remittances to yourself or send it back to Pakistan in any form. We are all very grateful to you for what ever you have been doing for us and for the economy of your motherland. The only little advice I would dare to render to you is that let us not start disowning our country for little additional sacrifice which may have to offer.

    Recommend

  • butt
    Nov 6, 2012 - 2:50PM

    I am living in Abu Dhabi, now swithed to Skype, and will not make my share in remittance to Pakistan, but now onwards remit my savings to Pakistan in the form of gold or any other form instead of banking channel. I also suggest all of my expat friends donot use banking channels for remittance. When beuracrates/politicians in Pakistan are not ready to look after us but to churn money from us for their luxurious life style, than why should we care for them

    Recommend

  • Mudasar
    Nov 6, 2012 - 9:50PM

    @S K Afridi:
    Oh ic—you know what we deserve how we are being treated. It’s the mind set you are reflecting that keep us pushing down the drain hole, i.e, not raising voice against the injustice.
    For the motherland we can do much more

    If you’ve not read the below comment of mine before, please read again. And decide yourself if the rate increase is justifiable.

    “Just in case you are not aware, calling India is 1.9 cents/min and calling Bangladesh is 3.9 c/min, now compare calling pakistan at 12 c/min.”Recommend

  • Khalid
    Nov 6, 2012 - 10:46PM

    I agree with Mudasar. Mr. Afridi don’t know the average salary of a person living in Saudi Arabia.PTA and IT ministries are useless and they himself are not able to control gray traffic. For gray traffic they increase rates but same logic apply for Bangladesh and India.How Bangladesh and India are handling gray traffic. Moral is these peoples are inefficient and corrupt. This is best way to stop low remittance as much as you can.

    Recommend

  • Nov 7, 2012 - 12:49PM

    I am living in Abu Dhabi, now swithed to Skype, and will not make my share in remittance to Pakistan, but now onwards remit my savings to Pakistan in the form of gold or any other form instead of banking channel. I also suggest all of my expat friends donot use banking channels for remittance. When beuracrates/politicians in Pakistan are not ready to look after us but to churn money from us for their luxurious life style, than why should we care for them

    Recommend

  • faraz anwar
    Nov 12, 2012 - 1:53PM

    Expat as remitting more than 13Bn $ annually which is supporting Pakistan Balance of Payment, why expats are being imposed with such taxes.

    If they want to increase the revenue, they should have decreased the taxes so that more people should call at home…… unjustify with more Loyal Pakistanis than our Politician.

    Recommend

  • Shahid
    Nov 13, 2012 - 2:57PM

    The life for an expat is not bed of roses. Majority of Pakistanis abroad are in middle east mostly representing Paksitani expats are labor. Thier earning average is not sufficient to support thier living and that of thier familes back home. How is it justified to deprive them of thier only happiness of talking to thier loved ones. While the calling rates are already cheaper for ur neighbouring countries what justification may the governement have is both socially and technically illogical and counter productive.

    Recommend

More in Business