KARACHI: In the forthcoming mini-budget, the government is mulling increasing the withholding tax (WHT) on cellular services from 10% to 15%.
The decision directly opposes the federal budget’s announcement of a cut in the tax on phone calls for 2021-22. Furthermore, it is harmful to the economy’s digitalization drive and undermines the ‘Digital Pakistan’ agenda. WHT is currently collected at a rate of 10% from all telecom users, regardless of their tax liability.
Only about 2.9 million persons, or about 1% of the total population, file income tax returns out of a population of 220 million. Even though most of the country’s population has non-taxable income, these individuals are required to pay WHT, which they will never be able to reclaim. According to a study issued by the Sustainable Development Policy Institute (SDPI), Pakistan is already one of the world’s most heavily taxed telecom markets, ranking second in South Asia in terms of telecom taxation.
The Economist Intelligence Unit’s latest Inclusive Internet Index painted an alarming picture of internet availability, affordability, relevance, and readiness in Pakistan, which is currently in the bottom quartile of the index, second to last in the Asian region, and 90th overall out of 120 countries studied. WHT charges for 187 million cellular subscribers are also discriminatory compared to WHT rates for landline users, which are set at progressive rates based on the amount billed.
On the other hand, regardless of the users’ position, the rate of WHT on mobile phone customers is consistent. In a letter to the finance ministry, GSMA Head of Asia-Pacific Julian Gorman stated that imposing an additional tax would be detrimental to mobile phone users and pose a substantial risk to the government’s ability to achieve the ‘Digital Pakistan’ objective.
Various consumer advocacy groups and organizations have also requested the government to eliminate the WHT on telecom services to make cellular and broadband services more affordable to low-income people.