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.
