Archive for June 17th, 2008

2008-09 Budget Imposes High Taxes On Telecommunication Industry In Pakistan

Published by Babar Bhatti on June 17, 2008 under Broadband Internet, Business, Consumer Rights, Mobile Phones, Pakistan, Strategy & Policy, blogging

Mansoor has written a good post about the implications of 2008-2009 budget for telecom and IT industry in Pakistan. Thanks to Mansoor’s hard work, it is easy for the rest of us to understand the impact of budget decisions on consumer and business activities related to voice and data. I am appalled by the rate of increase of taxes and its negative impact on consumers.

Mobile and telecom industry has been a great money making machine for Pakistan Treasury. Last year The GSM association did a detailed study on the impact of taxes on mobile phones in Pakistan and advised the government to reduce the activation taxe on SIMs. The study pointed out that by reducing the taxes the consumption will go up and government will get more money in. Here the government seems to be going in opposite direction.

The tax increases are  wrong and will hurt both consumers the overall industry. I would like to know who was behind this irrational increase in taxes and fees on telecom services? Here’s an excerpt from Mansoor’s post:

The first levy which comes to mind is the standard Rs. 500 levied on each imported handset. While it may be argued that levying a standard amount on sets which vary in price from under Rs. 2000 to Rs. 30000+ is unfair, given how our country operates in terms of corruption, a single rate at least has a much lessor chance of being misused.

The next item on the agenda, would be the increase of withholding tax on calls to 21%, which basically means that for each Rs. 100 card you now put into your credit line, you’ll be paying Rs. 30 as taxes instead of Rs. 24 as we did previously. The one thing it will not hurt is cell phone companies, since they already advertise their charges as rate+tax.

And lastly, an additional tax of Rs. 100 on all phone bills exceeding Rs. 1500 is a major blow. I’m pretty sure this is applicable only on landlines but please correct me if im wrong. Essentially, this means that if you have a landline and manage to accumulate a bill of over Rs. 1500 e.g. by having PTCL DSL on the line, then you pay an additional Rs. 100 each month to the government.

According to a comment by Waqas “The withholding tax on fixed line is 10% if the bill is more then Rs. 1000 (not a fixed Rs.100 and pre req amount is not 1500).”