Mini-budget a threat to digital revolution

Industry player says high taxes make telecom services, smartphones costly for consumers

ISLAMABAD:

Tax revisions for telecom sector in the mini-budget have vexed the stakeholders, who urge the government to ensure consistency in policies to achieve the vision of ‘Digital Pakistan’.

Referring to the changes in taxes over the past seven months, Jazz CEO Aamir Ibrahim told The Express Tribune that unpredictable and abrupt changes in policies were limiting the capacity of mobile network operators to plan and invest in Pakistan to ensure improvement in the quality of services.

“Telecom companies have vented their frustration about some of the government policies, echoing the feelings of consumers,” he said.

In the recently approved mini-budget, the taxes on telecom consumers reached almost 35% in addition to the 5% hike in advance tax.

Under the Finance (Supplementary) Bill 2021, taxes on digital gadgets, such as smartphones and laptops, were raised, which made them significantly costlier for the common man.

The tax revision for the telecom sector came just a few months after the announcement of budget for 2021-22 under which the government reduced the advance tax and promised a further 2% reduction in 2022. The relief had been granted after years of evidence-based convincing on behalf of bottom-of-the-pyramid users, however, it was withdrawn within a few months.

“A digital revolution is unlikely to take place in an environment where a substantial percentage of the population finds it difficult to afford basic mobile phone services and own smartphones and laptops,” he said.

Read Mini-budget impact on the vulnerable

Millions of subscribers lack a stable income or do not fall under any tax bracket but still they are being forced to pay the levies, he contended, adding that in its efforts to bring half of the population online, Pakistan should stop causing friction such as the abrupt tax hikes.

“This move is counter-productive to the Digital Pakistan ambition,” remarked Ibrahim in an interview with The Express Tribune.

In fiscal year 2019-20, the telecom sector contributed $622.5 million (24%) to the total net foreign direct investment in the country. However, Ibrahim warned that short-term policies of the government had perturbed the foreign investors.

“A prime example of the lack of trust is the spectrum auction of 2021 in which only one telecom operator expressed the willingness to invest,” he pointed out.

In the present age, telecom companies risk losing out on business opportunities if they fail to integrate their services and infrastructure with the emerging digital ecosystem.

Instead of burdening the sector and its users, it is imperative that the stakeholders are assisted in contributing to efficiency gains across all sectors of the economy and empowering half of Pakistan’s unconnected population with high-speed broadband to ensure that no one is left behind, Aamir added.

In similar views, GSMA Head of Asia-Pacific Julian Gorman in a recent tweet pointed out “in a world of digital nations, Pakistan must provide a competitive investment landscape to achieve its Digital Pakistan vision.”

“I urge the government to reconsider its plans and prioritise building an inclusive, connected population for a prosperous digital economic transformation,” she said.

Published in The Express Tribune, February 9^th, 2022.

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