ISLAMABAD: The withholding tax of 12.5pc on every mobile recharge is high since majority of the subscribers fall below the threshold of being taxpayers and cannot get the paid amount adjusted in their annual tax returns, said the Pakistan Telecommunication Authority (PTA) in its annual report.

While the federal excise duty (FED) has been decreased to 17pc from 18.5pc in the budget, the tax rates of the provincial revenue departments are still quite high and should be reduced following the example of the federal budget, it added.

“The harmonisation of federal and provincial tax laws is important to resolve the sales tax collection issues.

“High customs duty and other taxes on the import of mobile handsets and telecom equipment also impede the mobile phone service penetration,” the regulatory body said in the 50-page report.

Under the heading of ‘Industry issues and way forward’, the PTA said rationalisation of taxes in the telecom sector was a major challenge being faced by the industry for the last a few years.

Harmonisation of federal, provincial tax laws important to resolve the sales tax collection issues, annual report says

However, after coordinated efforts by the PTA and the telecom industry, the withholding tax has been brought down from 14pc to 12.5pc in the federal budget 2017-18. But even the 12.5pc withholding tax is high, the report added.

The PTA claimed to recognise the industry issues and plan to resolve them in the next two years to bring significant innovations in the telecom sector.

The telecom contribution to the national exchequer in 2016-17 has been estimated to be Rs161.43 billion compared to Rs126.26 billion in 2014-15.

The report said the number of cellular mobile subscribers in 2016-17 increased to 139.76 million compared to 114.66 million in 2014-15.

Similarly, the number of 3G and 4G users increased from 13.5 million in 2014-15 to 42.1 million in 2016-17.

Former PTA chairman Dr Ismail Shah said at present more than 87pc of the population falls under the cellular mobile signal, out of which 70pc were covered by 3G services and 30pc can access 4G services.

The report said the advent of 3G and 4G services had already created a phenomenal buzz in the electronic and mobile application and service delivery.

The operators are recognising the fact that data was the next big thing and accordingly data-centric services were being rolled out for the citizens.

Asking for tax reductions on mobile cellular services the operators have been pushing the government for cuts on the prices of mobile handsets.

Mobile cellular operators argue that smart phone penetration was only 30pc and that 50 million people who still do not have mobile phones needed to be connected.

The telecom companies complain about the 40pc taxes on their revenues in Pakistan which is the highest in the world.

This burden is passed over to consumers making cellular mobile services unaffordable for the citizens.

Published in Dawn, December 4th, 2017