Experts weigh in on tax on mobile phone calls

Say users will learn to disconnect and redial before five minutes are up to defeat purpose of this levy

ISLAMABAD/KARACHI:

The government’s decision to introduce tax on mobile phone calls has perplexed the telecom industry and the general public.

The telecom industry has said that the proposed taxes on mobile calls over five minutes are not implementable and will play havoc with the prepaid bundles that are currently being enjoyed by the lowest segment of society.

Earlier, in the finance bill, the government had proposed tax of Rs1 per call of more than three minutes, Rs5 per 1 gigabyte of internet usage and 10 paisa on each SMS. However, after a strong reaction from the public it withdrew taxes and introduced tax of 75 paisa per call exceeding duration of five minutes.

Following this, now a five-minute phone call will cost users an approximate Rs2.72 instead of the previous Rs1.97. The 75 paisa tax is in addition to the 19.5% federal excise duty for a voice call. Hence, a user will now be charged 40% additional taxes if the voice call exceeds five minutes.

As per the industry, the charging structure is not linear and is based on bundle offers to facilitate prepaid users, which account for 98% of overall cellular subscribers in Pakistan. “This regressive move will play havoc with the prepaid bundles as the operators will be constrained to remove such offerings, making voice calling significantly more expensive,” said an industry official.

Some were of the view that users will quickly learn to disconnect and redial before five minutes are up to defeat the purpose of this levy, which will add to the complexity for the telecom sector. The officials added that this will also impact the industry’s ability to provide mobile broadband as being part of one industry ecosystem voice and broadband internet cannot be viewed in isolation. A regressive policy move in one area will surely affect the other. Currently, there are 183 million cellular subscribers in Pakistan out of which 98 million use mobile broadband and 85 million only basic voice calls. The lowest segment of society like watchmen, labourers would be the hardest hit by an additional tax on telecom as they make long calls to their villages to stay connected with their families.

Read: Govt restores tax on mobile phone calls

As per industry experts, telecom taxes are irrationally high in Pakistan. As per research published by the Sustainable Development Policy Institute (SDPI), Pakistan is considered to be among the highest taxed telecom markets in the world.

The industry officials added that it was high time the government consider smartphones and mobile broadband as a much-needed productivity tool rather than a luxury. This will help rationalise the exorbitant taxes imposed on mobile connectivity and mobile broadband and give digital adoption a fair chance. In addition to the wide economic benefits that higher broadband proliferation can deliver, increased usage has the potential to boost government tax revenues in the long-term due to rationalised taxes.

ICT Consultant Pervaiz Iftikhar said, “This new tax will be of no use to the government. People can just cut their calls before the five-minute mark and redial. On the other hand, it is a complication for mobile companies. They have to monitor each call now. Consumer complication is in terms of cutting calls before five minutes or they can request the Pakistan Telecommunication Authority (PTA) to provide a beeper facility that goes off once the five-minute duration is about to be crossed. Overall, this is nothing but a nuisance and no real value can be driven from this tax.”

Another economic expert said, “”The government decided that the earlier announced taxes on wheat flour and its by-products, milk and medical bills of government employees, will not be included in the final bill. But to fill this void, it is apparent that Finance Minister Shaukat Tarin and his team decided to impose a new tax on mobile calls, which will fetch the government an additional Rs15-billion in revenue.”

Raising these concerns, Nest I/O Founder Jehan Ara tweeted, “Are they targeting the less advantaged because most people with smartphones and WhatsApp will not really be impacted by this policy.”

“Our entire work is based around mobile calls. We are already burdened by heavy taxation and whenever a mobile card is loaded almost Rs12 is deducted before use. Then we have to pay 19.5% on each call. With this new tax, we will not even have the precious few voice minutes to use.

Published in The Express Tribune, June 27^th, 2021.

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