As most telecom customers fall below the taxable limit, the Overseas Investors Chamber of Commerce and Industry (OICCI) has proposed that the government totally remove the rate of advance tax on telecom users. This will help make mobile service more affordable.
The OICCI suggested that the government restructure the withholding tax regime in its taxation proposals for the 2024–2025 budget because it will increase transparency in tax claims and their verification process while posing the fewest operational difficulties.
According to the chamber, the Finance Act of 2021 lowered the advance tax on telecom services from 12.5% to 10% for the fiscal year 2021 and to 8% for subsequent years. Nevertheless, the Finance (supplementary) Act, 2021 raised the withholding tax rate from 10% to 15%. Given that over 70% of Pakistan’s population is impoverished, higher taxes make mobile service—which is essential for the entire population—more expensive. Another essential component of a nation’s economic development is telecom service.
Furthermore, when compared to its regional counterparts, Pakistan exhibits the greatest gender disparity in terms of mobile internet use (43 percent) and ownership (34 percent). The cost of mobile services has increased due to sector-specific taxes, which has a negative effect on the poorest consumers, particularly women, making it harder for them to subscribe to mobile broadband.
Withholding tax on all subscribers would be illogical given that over 70% of the population is impoverished and that only a small percentage of return filers file returns. Additionally, the lower withholding tax will help make internet and data services more affordable for those with lower incomes.