PTA to Press Provinces for Removal of Internet Taxes

After Punjab’s rigidness in maintaining internet taxes despite several promises of removing them altogether, Pakistan Telecommunication Authority has decided to approach provincial governments itself in order to convince them to remove internet taxes.

Business Recorder, while citing a senior regulatory official, reported that PTA has finally decided to make a move as the downward trend in telecom sector, mainly due to these taxes, is jeopardizing the chances of any 3G/4G auction that government is planning to conduct during next few months.

Mobile phone companies have already said that they aren’t considering participation in any spectrum auction as the investments they had made during past two years were only met with new internet taxes. In such a climate, further investment doesn’t make any business sense.

Keeping in view the prevailing situation, PTA has apparently moved to approach Punjab, KPK and Sindh to enlighten them on the worsening situation of the sector that contributes the most towards national economy.

Internet Taxes in Pakistan are As High as 33.5%

Just in case if you don’t know, KPK and Punjab charge 19.5% sales tax on internet, while Sindh Charges 18.5% tax on internet.

Additionally, there’s 14% withholding tax that internet users have to pay to federal government.

In total, internet taxes amount to around 33.5% in KPK and Punjab while it’s 32.5% in Sindh.

Internet Taxes are Negatively Impacting the Telecom Sector

For the first time since deregulation of the telecom sector in 2003, revenues of Pakistani mobile phone operators showed a negative growth during last fiscal year (2014-15).

Also Read: Thanks to Taxes, Telecom Revenues & Tax Contributions Decline During 2014-15

Not only this, telecom sector’s contribution towards government taxes also declined (during 2014-15) to prove that the very purpose of taxing telecom services back-fired and government collected lesser taxes from sector as compared to previous year. However, no one at the government level is concerned or even considering these figures.

More details in below infographic:

Internet Taxes Else Where in the World

No one taxes the internet which is considered as a basic right. In fact Pakistan is only the second country — after Bhutan — in the world to tax internet services.

Countries make all sorts of efforts to make sure that internet is affordable to their masses due to the proven fact that internet access grows the GDP of a country from 0.4% to 1.5% with higher impact for developing economies like Pakistan.

Estimates show that internet taxes could cause Pakistan’s economy an estimated loss of Rs. 200 billion during next five years.

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