Pakistan’s telecom industry has asked the government to reduce several taxes on mobile services, arguing that lower taxes will make mobile communication more affordable, attract more users, and eventually increase government revenue.
The proposal was presented by the Telecom Operators Association during a meeting of the Senate Standing Committee on Finance and Revenue, chaired by Saleem Mandviwalla.
However, lawmakers and government officials have asked the telecom industry to provide detailed evidence before any decision is made.
Telecom Industry Wants Lower Taxes
Representatives of telecom companies told the committee that the sector is currently facing significant financial pressure due to high taxes, rising operating costs, inflation, energy shortages, and the need for continuous investment in network infrastructure.
To address these challenges, the industry proposed several tax-related measures.
Proposal to Reduce Advance Income Tax
The telecom industry’s main demand is a reduction in the advance income tax charged on mobile usage.
Currently, mobile users pay 15 percent advance income tax when purchasing mobile credit or recharging their prepaid accounts.
Telecom operators want this rate reduced to 8 percent.
According to the industry, the current tax burden makes mobile services expensive for millions of Pakistanis.
They believe that reducing the tax rate would make mobile services more affordable, encouraging more people to use mobile phones and internet services regularly.
The operators argue that increased usage would eventually generate higher overall tax revenue for the government, despite the lower tax rate.
Industry’s Argument
The telecom companies explained their reasoning as follows:
- Lower taxes reduce costs for consumers.
- Lower costs encourage greater mobile usage.
- More people use telecom services.
- Subscriber numbers increase.
- Digital activity grows.
- Overall tax collection rises over time.
The industry believes that a lower tax rate combined with higher usage can generate more revenue than the current system, where taxes are high and mobile services remain expensive for many people.
Proposal to Reduce Withholding Tax
The telecom sector also requested a reduction in withholding tax (WHT).
Currently, telecom companies face a 6 percent withholding tax rate.
The industry wants the rate reduced back to 4 percent.
Telecom operators argue that the recent increase from 4 percent to 6 percent has placed additional pressure on their finances.
Why Operators Want WHT Reduced
According to the industry, withholding tax is collected upfront before companies fully realize their revenues.
This means telecom companies must pay taxes immediately, even before they have completed their business transactions and earned profits.
Industry representatives say this creates cash flow problems and reduces the money available for:
- Network expansion
- Infrastructure upgrades
- Maintenance work
- Customer service improvements
- Investment in new technologies
Operators argue that lowering the withholding tax rate would free up funds that could be invested back into the telecom sector.
Proposal to Extend Tax Credit Carry-Forward Period
The telecom industry also requested changes to turnover tax rules.
At present, telecom companies can carry forward turnover tax credits for only two years.
The industry wants this period extended to five years.
Why This Change Matters
Telecom companies invest billions of rupees in infrastructure such as:
- Mobile towers
- Fiber optic networks
- Data centers
- Network equipment
- Spectrum licenses
These investments often take many years to generate profits.
Industry representatives argue that a two-year carry-forward period is too short because telecom infrastructure projects usually require longer periods before generating returns.
A five-year carry-forward period would provide greater flexibility and help operators recover their investments more effectively.
Senate Committee Wants Proof
While committee members listened carefully to the proposals, they did not immediately support them.
Instead, lawmakers asked the telecom industry to submit detailed written evidence supporting its claims.
Committee members want the industry to prove that reducing taxes would actually increase government revenue.
The committee’s position is simple:
Before reducing taxes, the government wants to see data showing:
- Expected increase in mobile usage
- Projected growth in subscribers
- Estimated impact on government revenue
- Economic benefits of tax reductions
- Timeline for achieving those benefits
Officials emphasized that tax cuts should be based on evidence rather than assumptions.
Finance Ministry Shares Similar Concerns
Government officials, including the Finance Minister, reportedly supported the committee’s decision to seek additional information.
The government wants clear financial models showing how lower tax rates could eventually generate more revenue.
Officials are particularly interested in understanding:
- How many new users would join the telecom network
- How much mobile data usage would increase
- Whether additional economic activity would offset lost tax revenue
Until these questions are answered, no final decision is expected.
Pakistan’s Telecom Sector Faces Real Challenges
Although lawmakers requested more evidence, many of the telecom industry’s concerns are widely recognized.
Pakistan’s telecom sector faces several ongoing challenges.
Heavy Tax Burden
Industry experts often point out that mobile users in Pakistan face some of the highest telecom-related taxes in the region.
Every time prepaid users recharge their mobile balance, various taxes and deductions are applied.
These taxes increase the overall cost of mobile services for consumers.
Since most Pakistani mobile users rely on prepaid connections, the burden falls heavily on lower-income households.
Rising Operating Costs
Telecom companies are also dealing with increasing operational expenses.
These include:
- Electricity costs
- Fuel expenses
- Equipment maintenance
- Import costs
- Currency depreciation
Running mobile networks across the country has become significantly more expensive in recent years.
Load Shedding and Diesel Costs
Power shortages continue to affect telecom operations.
Many telecom towers depend on backup generators during electricity outages.
This requires large amounts of diesel fuel, which has become increasingly expensive.
As a result, telecom operators are spending more money simply to keep their networks running.
Low Revenue Per User Remains a Challenge
Another major issue facing the telecom sector is Pakistan’s low Average Revenue Per User (ARPU).
ARPU measures how much money a telecom company earns from each customer.
Pakistan has one of the lowest ARPU figures in Asia.
This means telecom operators earn relatively little revenue from each subscriber compared to operators in many other countries.
Low ARPU makes it more difficult for companies to recover the costs of:
- Infrastructure expansion
- Network upgrades
- New technology deployment
This challenge becomes even greater when combined with high taxes and operating costs.
Impact on Network Expansion
Industry representatives warn that financial pressure could slow future investments in telecom infrastructure.
If companies have less money available for investment, it may affect:
- Mobile network coverage
- Internet quality
- Fiber optic expansion
- 4G upgrades
- Future 5G deployment
Telecom operators argue that reducing certain taxes would help them invest more aggressively in network improvements.
Importance for Digital Pakistan
The debate comes at an important time for Pakistan’s digital transformation efforts.
The government has repeatedly emphasized its vision for a “Digital Pakistan.”
This vision depends heavily on:
- Reliable mobile networks
- Affordable internet access
- Wider digital inclusion
- Strong telecommunications infrastructure
Many government services, online businesses, educational platforms, and digital payment systems rely on mobile connectivity.
Industry experts argue that affordable telecom services are essential for achieving these national goals.
What Happens Next?
The next step now rests with the Telecom Operators Association.
The industry must prepare a detailed written submission explaining:
- Why taxes should be reduced
- How lower taxes would increase usage
- How government revenue would benefit
- What economic impact the changes would have
The Senate committee will review this information before deciding whether to support any of the proposed tax reforms.
Conclusion
Pakistan’s telecom industry is asking the government to reduce taxes on mobile services, arguing that lower taxes would make communication more affordable, increase mobile usage, and ultimately generate more revenue through a larger user base.
The industry wants:
- Advance income tax reduced from 15% to 8%.
- Withholding tax reduced from 6% to 4%.
- Turnover tax carry-forward extended from 2 years to 5 years.
While lawmakers acknowledge the challenges facing the telecom sector, they are seeking detailed evidence before approving any tax relief.
The outcome of these discussions could have a significant impact on Pakistan’s telecom industry, digital economy, future network investments, and the millions of mobile users who rely on affordable communication services every day.
