Despite opposition from the Federal Board of Revenue (FBR), Adviser to Prime Minister on Institutional Reforms and Austerity Dr Ishrat Husain has advocated tax break for the telecom sector to speed up expansion of broadband penetration.
In a meeting of the Economic Coordination Committee (ECC) held last week, the Ministry of Information Technology proposed that economic policymakers should abolish 12.5% advance income tax and cut federal excise duty to 16%.
At present, the telecom sector is paying 12.5% advance income tax and 17% federal excise duty on telecom services. At 12.5%, withholding tax (WHT) on telecom services is significantly higher in comparison to the tax on some other sectors.
The IT ministry also proposed the withdrawal of SIM issuance tax of Rs250 on the telecom sector.
During the ensuing discussion, the forum appreciated the initiative. However, the FBR did not support the proposals with remarks that the abolition of 12.5% advance income tax could substantially reduce the country’s annual revenue collection.
Officials say the FBR is collecting Rs2 billion annually on account of WHT.
Husain was of the view that the importance of IT sector was beyond any explanation and broadband penetration in Pakistan was around 40% against around 80% across the world, including in neighbouring countries of Pakistan.Therefore, he said, the expansion of broadband penetration could be incentivised through concessions in the tax regime. He was of the view that the overall impact of tax reduction would not be very significant as the number of broadband users would increase.
Special Assistant to Prime Minister on Revenue Dr Waqar Masood appreciated the remarks but argued that the timing factor was also very important while making a decision.
Published in The Express Tribune, November 6th, 2020.
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i think sales tax should stay we need to earn when they earn to be honest... yes the break as long as that materialises into construction and expansion of assets and services is good ... can ptcl be made partner in that or govt can be added to the mix to say yes you do not pay us the tax but we will hold that as investment into your assets