OICCI proposes abolition of WHT on telecom

Recommends 8% WHT as high taxes threaten digitalisation drive

ISLAMABAD:

The Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed the abolition of withholding tax (WHT) on telecommunication to promote the affordability of internet and data services for low-income segments of society.

According to the OICCI, the overall 34.5% tax on telecom users, including 15% WHT and 19.5% general sales tax (GST), makes Pakistan one of the highest taxed telecom markets globally. “Such exorbitant taxation is detrimental to the digitalisation drive and overall economic growth.”

It said while WHT was reduced from 12.5% to 10% for FY 2021 with a commitment to 8% onwards vide Finance Act 2021, it was reversed six months later without due consideration of its long-term ramifications. “Now, it should be reversed to 8% for fiscal year 2022-23.”

Through the Finance (Supplementary) Act 2022, the WHT rate was raised from 10% to 15%, taking the overall tax on 195 million telecom users to almost 35%.

Besides, WHT on telephone and internet services is a contentious tax revenue, as it hampers the affordability of mobile ownership and internet services, which are critical for the entire population and the economic growth.

With more than 70% of Pakistan’s population living below the poverty line, the majority of the subscriber base falls below the taxable limit, the OICCI highlighted. In addition to abolishing the tax, the OICCI urged the government to encourage the use of alternative energy resources in the telecom sector, such as solar, by reducing the customs duty on batteries and scrapping the additional customs duty and regulatory duty.

These batteries are core assets for telecom infrastructure service providers.

The chamber also proposed the abolition of advance tax on auction/ renewal of licences, as “spectrum is not sold, but only the right to use the spectrum for a specified term is granted to telecom operators, and licences too are granted for a specific term only.”

The telecom sector has already paid a significant amount in advance taxes beyond its tax liability.

It called for the harmonisation of federal and provincial sales tax laws and the drafting of a uniform service tax law agreed upon by the tax authorities of provinces and the federal government for implementation in their respective jurisdictions.

Published in The Express Tribune, May 9^th, 2023.

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