2008-09 Budget Imposes High Taxes On Telecommunication Industry In Pakistan
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).”
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Plan was quite obvious, Government tried to cover their overall deficits from telecom sector only, needless to say that Telecom companies are earning good…and telecom services are the one that could get the Govt some bucks…
Aamir, good post. We are in agreement that this is a ploy to make money. Most of the burden will be actually passed to consumers and not to the companies. But no one cares about consumers.
From Dawn, June 21: With the imposition of 21 per cent federal excise duty (FED) on telecom services in the 2008-09 budget, cell phone users will have to pay an additional amount of at least Rs15 billion during the next fiscal year.
I am appalled by reading the comments of Babar Bhatti, when he says that the tax increase burden will be passed on to consumers by the mobile phone operators.
Well if you see both sides of the picture, it’s only the call rates offered by cel phone companies that have went down despite operational cost is rising day by day in lieu of rising fuel prices, electricity bills & load shedding etc.
The people who think that Mop’s are just minting money from the people should read this article: http://www.thenews.com.pk/daily_detail.asp?id=124046
To make the industry more competitive and ensure quality services for the consumers, Govt. should not adopt such measures while it is already getting 36% of its revenue in shape of taxes from Telecom industry (Source: http://www.pta.gov.pk)
This tax is imposed in Budget 2008-09 which should be applied from July 1, 2008 but actually charged by Mobile companies from June 1st 2008. It shows that no one is here to ask these people whatever right or wrong they do.
[...] not hurt is cell phone companies, since they already advertise their charges as rate+tax. Also the Telecom Taxes in Pakistan are highest in the region , well needless to say, other taxes are also one of the [...]