Number crunching: Finance Bill 2014 reveals budget as unfriendly

Telecom sector laments ‘high taxation rates’, to meet Dar soon.

KARACHI:

Finance Minister Ishaq Dar, on June 3, proudly announced some tax cuts for the telecommunication sector. The details of the Finance Bill 2014, however, tell a different story.

After reviewing the bill in detail, the cellular mobile operators (CMOs) have termed the budget 2014-2015 unfriendly that negatively impacts the telecom sector’s growth.

The CMOs are expecting a meeting with the finance minister soon, according to sources familiar with the matter. The industry will discuss the finance bill with the minister and share their concerns about ‘high taxation rates’, sources say.



“The recently-announced Finance Bill 2014 is a small step in the right direction, however, the relief offered to the telecommunications sector is far below our expectations,” Telenor Pakistan’s Chief Corporate Affairs and Security Officer Muhammad Aslam Hayat said in a statement on Thursday.

The finance ministry withdrew federal excise duty (FED) on telecom services from provinces that charge general sales tax (GST).

“The 1% relief on FED is only applicable to the Federal Capital and Balochistan whereas the provinces are still charging GST at 19.5%,” Hayat said.

“In case of Rs100 prepaid card, the reduction of 1% in withholding tax (WHT) and 1% in FED will only translate into Rs1.26 in customer’s benefit, which is practically nothing,” said an official who requested anonymity.

Various studies have shown that 3G penetration is slower in countries with higher tax burden and in the long-run it also impacts the government revenues adversely, according to industry sources. With advent of 3G in Pakistan, industry sources say, it is expected that mobile data penetration will directly impact gross domestic product (GDP) growth in future.

Published in The Express Tribune, June 6^th, 2014.

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