The government is considering increasing the withholding tax (WHT) on cellular services from 10% to 15% in the upcoming mini-budget.
The move is in direct conflict with the reduction in tax on phone calls announced in the federal budget for 2021-22. Moreover, it is also detrimental to the digitalisation drive for the economy and undermines the ‘Digital Pakistan’ vision.
Currently, 10% WHT is collected from all telecom users regardless of their income tax liability.
Out of the population of 220 million, only around 2.9 million people file income tax returns, which is 1% of the total population. Even though a majority of the country’s population has a non-taxable income, these people are paying WHT, which they can never claim back.
According to a research published by the Sustainable Development Policy Institute (SDPI), Pakistan is already among the highest-taxed telecom markets in the world, while it ranks second highest in telecom taxation in South Asia.
The latest Inclusive Internet Index, released by the Economist Intelligence Unit, also presented an alarming picture of internet availability, affordability, relevance and readiness in Pakistan, which currently falls within the bottom quartile of the index, second to last in the Asian region, and at 90th place overall out of the 120 countries studied.
The rate of WHT for 187 million cellular subscribers is also discriminatory as compared to the WHT applicable to landline users where progressive rates have been defined, according to the billed amount.
On the other hand, the rate of WHT on mobile phone subscribers is uniform irrespective of the status of the users.
Earlier, in a letter to the finance ministry, GSMA Head of Asia-Pacific Julian Gorman underlined that the imposition of additional tax would have a negative impact on mobile phone users and pose a significant risk to the government in achieving the ‘Digital Pakistan’ vision.
Various consumer protection rights activists and associations have also urged the government to abolish WHT on telecom services aimed at making cellular and data services affordable for the low-income groups.
Published in The Express Tribune, December 21st, 2021.
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