The Overseas Investors Chamber of Commerce and Industry (OICCI) is lobbying the Pakistani government to abolish advance tax on telecom subscribers in the upcoming budget. They argue this tax disproportionately impacts low-income citizens and hinders mobile service affordability.
Current Scenario:
- Advance tax on telecom services was initially reduced from 12.5% to 10% for fiscal year 2021 and further lowered to 8% for future years through the Finance Act, 2021.
- However, a subsequent Finance Act increased the withholding tax on telecom services from 10% to 15%.
OICCI’s Concerns:
- Burden on Low-Income Users: With over 70% of Pakistan’s population living below the poverty line, the advance tax unfairly burdens those who may not even be liable to pay income tax.
- Gender Gap in Mobile Access: High mobile service costs exacerbate the existing gender gap in mobile ownership and internet use, which is already significant compared to regional peers.
- Negative Impact on Economic Growth: Affordable mobile services are crucial for fostering economic development, and the current tax structure hinders this growth.
OICCI’s Recommendations:
- Complete Abolishment: The OICCI proposes entirely eliminating advance tax on telecom subscribers, simplifying tax collection and reducing administrative burdens.
- Withholding Tax Reduction: Alternatively, they suggest reinstating the previous withholding tax reduction of 8% as implemented in the 2021 Finance Act.
Benefits of Reducing Tax on Telecom:
- Increased Affordability: Lower taxes would make mobile services more accessible for low-income groups, promoting financial inclusion and digital literacy.
- Bridging the Gender Gap: Improved affordability could encourage increased mobile phone ownership and internet access among women, fostering greater gender equality.
- Economic Growth: A wider mobile broadband subscriber base strengthens the digital economy and contributes to overall economic development.
The Road Ahead:
The OICCI’s proposals will be considered alongside other budgetary measures. The final decision on telecom taxes will be revealed in the upcoming budget announcement.
