LAHORE   -   Pakistan’s telecom industry has raised alarms over the imposition of new taxes on mobile phone devices and telecom services in the country. The recently proposed budget for the fiscal year 2024-25 includes an 18% GST on mobile phones valued under $500 and a 25% tax on phones over $500.

Telecom operators argue that these new taxes will hamper digital progress and exacerbate the digital divide in the country as a majority of the population is unable to afford the high cost of connectivity. Affordability remains one of the primary causes of the digital divide in Pakistan, where 20% of the population still lacks any connectivity and about half of the population lacks access to mobile broadband due to high cost.

In addition to the GST on mobile phones, the government has also proposed an increase in withholding tax on telecom services, which is currently at 15%. Furthermore, the budget also proposed the imposition of a 75% withholding tax levy for non-filers and late filers, up from the existing 15%.

While expressing concerns over the budget 2024-25 proposals, the Telecom Operators’ Association stated that the exacerbated taxes on smartphones and telecom services will make these essential services even more unaffordable for Pakistanis. The operators cautioned that these measures will further widen the digital divide and negatively impact the lives and livelihoods of millions.

While telecom players have openly criticized the advance tax, arguing that the majority of users don’t even fall into the tax net, the new proposal has left them even more disappointed. They call it a move to stifle Pakistan’s digital dream and a major obstacle to the country’s digital progress.

Furthermore, telecom operators have warned that the newly proposed mobile phone and telecom taxes in the latest budget will discourage foreign direct investment (FDI) rather than attract it. “We have seen two major telecom players exit the Pakistani market over the past decade, yet it shocks us that the government hasn’t learned anything from these unfortunate FDI exits,” the telecom operators stated.

The Association highlighted that the telecom sector, one of the country’s largest economic contributors, has invested over $20 billion in Pakistan and has been indispensable for the country’s digital progress. “Telecom services are pivotal for making the Digital Pakistan dream a reality, but sadly, this hard fact fails to register with the government and policymakers.”