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, increase digital connectivity, and eventually generate higher revenue for the government.
The proposal was presented by the Telecom Operators’ Association during a meeting of the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla. While committee members listened to the industry’s concerns, they did not immediately agree with the proposals and asked telecom operators to provide detailed evidence to support their claims.
Telecom Industry Wants Lower Taxes
Telecom companies believe that the current tax burden on the sector is too high and is making it difficult for both operators and consumers.
They have requested the government to introduce several tax reductions that they say would help expand mobile usage across Pakistan.
Proposal to Reduce Advance Income Tax
One of the biggest demands from telecom operators is reducing the advance income tax on mobile usage.
Currently, mobile users pay a 15 percent advance income tax whenever they recharge their mobile balance or use telecom services. The telecom industry wants this rate reduced to 8 percent.
According to telecom companies, many people, especially low-income users, find mobile services expensive because of the high taxes imposed on every recharge. They argue that reducing the tax rate would make mobile services more affordable.
The industry believes that when prices become lower, more people will use mobile services, internet packages, and digital platforms. As a result, the number of subscribers would increase, creating a larger customer base.
Telecom operators say that although the government would collect less tax per user initially, the larger number of users would eventually compensate for the lower rate and could even increase overall government revenue.
Their argument is based on a simple principle: lower taxes encourage greater usage, and greater usage expands the tax base.
Request to Reduce Withholding Tax
The telecom industry has also asked the government to reduce the withholding tax (WHT) from 6 percent to 4 percent.
According to operators, the recent increase from 4 percent to 6 percent has created significant financial pressure on telecom companies.
Withholding tax is collected before companies actually earn revenue from their services. Telecom operators say this system affects their cash flow because they have to pay taxes upfront while still managing daily operational expenses.
The industry says that telecom companies are already facing rising costs due to:
- Network maintenance
- Electricity shortages
- Fuel expenses
- Load shedding
- Installation of backup generators
- Expansion of network infrastructure
- Investment in modern technologies
Because of these costs, telecom operators believe that lowering withholding tax would give them more financial flexibility and allow them to invest more money into improving network quality and expanding coverage.
Demand to Extend Tax Credit Period
Another major request relates to turnover tax credits.
At present, telecom companies can carry forward turnover tax credits for only two years.
The Telecom Operators’ Association wants this period extended to five years.
Industry representatives argue that telecom infrastructure projects require large investments and often take many years before generating profits.
Building telecom towers, laying fiber optic cables, upgrading networks, and purchasing spectrum licenses involve significant costs.
Since returns on these investments take time, telecom companies say the current two-year limit is too short.
They believe extending the carry-forward period to five years would provide relief to companies that invest heavily in network development but need a longer period to recover their investments.
Senate Committee Wants Evidence
While the committee listened to the telecom industry’s proposals, lawmakers were not ready to approve the recommendations immediately.
Instead, committee members asked telecom operators to submit their arguments in writing along with supporting data.
The committee wants proof that lowering taxes would actually increase government revenue.
Officials are seeking detailed information about:
- Expected growth in mobile users
- Impact of lower taxes on telecom usage
- Revenue projections
- Economic models
- Market research
- International examples
The government wants to ensure that any reduction in tax rates will not create a revenue shortfall.
Both the committee and the finance ministry believe decisions should be based on evidence rather than assumptions.
Why Telecom Companies Believe Lower Taxes Can Work
Telecom operators point to examples from other countries where lower taxes helped increase mobile penetration and digital inclusion.
Their argument is that when mobile services become cheaper:
- More people buy SIM cards.
- More users subscribe to internet packages.
- Digital payments increase.
- Online businesses grow.
- E-commerce expands.
- Government tax collection improves through broader economic activity.
They believe Pakistan can achieve similar results if tax rates are reduced.
However, government officials want to see data specific to Pakistan before accepting this argument.
Pakistan’s Telecom Sector Faces Challenges
The telecom industry says it is operating under difficult conditions.
Pakistan is considered one of the more heavily taxed telecom markets in the region.
Every mobile recharge includes various taxes and deductions, which increase the cost for consumers.
At the same time, telecom companies face rising operational expenses.
Low Revenue Per User
One of the biggest challenges is Pakistan’s low Average Revenue Per User (ARPU).
ARPU refers to the average amount of money a telecom company earns from each customer.
Pakistan’s ARPU is among the lowest in Asia.
This means telecom companies earn relatively little from each subscriber compared to operators in many other countries.
Low revenue makes it harder for companies to fund network upgrades and expansion projects.
Impact on Infrastructure Investment
Telecom operators argue that high taxes discourage investment.
When companies have limited profits and face high taxation, they become more cautious about spending money on infrastructure.
This can affect:
- Network expansion
- 4G coverage
- Future 5G deployment
- Rural connectivity
- Service quality improvements
Industry representatives warn that continued financial pressure could slow Pakistan’s digital development.
High Taxes Affect Consumers Too
The telecom industry says the current tax system does not only affect companies.
Consumers also bear a significant burden.
Most mobile users in Pakistan rely on prepaid services.
Whenever these users recharge their balance, taxes are automatically deducted.
For lower-income households, these deductions reduce the value they receive from each recharge.
Telecom operators argue that reducing taxes would directly benefit millions of consumers by lowering communication costs.
Digital Pakistan Goals Depend on Telecom Growth
The government has repeatedly emphasized its vision of creating a Digital Pakistan.
This vision includes:
- Expanding internet access
- Increasing digital payments
- Supporting e-commerce
- Encouraging online education
- Promoting freelancing
- Improving digital government services
However, telecom companies argue that these goals cannot be achieved without a financially healthy telecom sector.
According to industry representatives, affordable internet and mobile services are essential for digital transformation.
If taxes remain high, they believe progress toward digital inclusion could slow down.
Committee Waiting for Written Submission
The next step in the process is for telecom operators to submit detailed written proposals.
These submissions are expected to include:
- Financial calculations
- Revenue forecasts
- Economic analysis
- International case studies
- Industry statistics
After reviewing the data, the Senate committee will decide whether the proposed tax reductions should be recommended to the government.
The final decision will likely depend on whether the industry can convincingly demonstrate that lower taxes would eventually generate higher government revenue.
What This Means for Mobile Users
The outcome of these discussions could affect around 207 million mobile subscribers in Pakistan.
If the government accepts the proposals:
- Mobile taxes may decrease.
- Recharge costs could become lower.
- Telecom services may become more affordable.
- Operators could invest more in networks.
- Internet coverage and quality may improve.
If the proposals are rejected:
- Existing tax rates will likely remain in place.
- Consumers will continue paying current tax levels.
- Telecom companies may continue facing financial pressure.
Conclusion
Pakistan’s telecom industry is urging the government to reduce taxes on mobile services, arguing that lower taxes will encourage greater usage, increase digital connectivity, and eventually boost overall tax revenue.
The industry has proposed reducing advance income tax from 15 percent to 8 percent, lowering withholding tax from 6 percent to 4 percent, and extending turnover tax credit benefits from two years to five years.
While the Senate Standing Committee on Finance and Revenue has not rejected these proposals, it has asked telecom operators to provide detailed evidence proving that tax cuts would ultimately benefit government revenue.
The debate highlights a broader challenge facing Pakistan: balancing government revenue needs with the goal of expanding affordable digital access for millions of citizens. The final decision could have a major impact on consumers, telecom companies, and the country’s long-term digital development plans.
