Unjustified heavy taxes on telecom sector

It still goes unnoticed that the telecom sector in Pakistan is paying 19.5 per cent as government taxes and this ratio is higher than that of other countries of the region. India and Bangladesh have respectively imposed 10.3 per cent and 15 per cent taxes on their telecom industries. While on the other hand, the Pakistani telecom operators are offering the lowest call rates in this region and telecom sector has added Rs 510bn to the national exchequer since 2004. There has been a strong observation that the high taxes on telecom sector are impeding the growth of this sector in the country. The government taxes on local telecom industry are 52 per cent higher than the Indian telecom industry. If Pakistan takes measures to decrease this difference then the telecom sector growth will reach new heights in a couple years. However, ironically the government at all levels is now seeing the telecom operators as a cash cow, with each bringing its own charges and levies for one right or the other. Besides, the telecom operators had, in the past few years, been unable to operate in certain areas of the country like D.G.Khan, Wana, Swat and other troubled areas, while the general public demands quality services on the part of telecom operators, who find it a hard job especially amid the non-conducive law and order situation. Subsequently, this state of affairs may further discourage foreign investments. For the country to have healthy operations in the telecom sector there must be certainty in rates and certainty in the mechanism of collection. Rates should be as enshrined in statutes and government, rather than tax consultants, should collect taxes to remove any additional burden on the tax payers. Telenor Pakistan is going to increase service charges on card reloads to 7 per cent effective from February 15. Earlier, Mobilink has also increased the service charges on credit reloads in addition to other charges already in place. Though the operators defend these additional charges due to the increased operating expenses and low ARPUs and tariffs in Pakistani market, repeated additions in such charges and massive taxes on telecom services is putting the common customer with average usage under a lot of burden. At this critical stage when the country is heading for the auction of 3G/4G spectrum next month, hoping to receive heavy investments in shape of licence fee, the government needs to come up with a set of comfortable revenue policies as it would help in wooing more foreign investments in the country.