ISLAMABAD, May 9, 2025 – As Pakistan prepares its federal budget for fiscal year 2025–26, the telecom industry has put forward a comprehensive set of proposals, calling for the abolition and rationalization of various tax measures that, it says, are stifling growth, innovation, and affordability in the sector.
In its formal budget submission, industry stakeholders urged the government to abolish the 15% withholding tax on telecom services. They argued that the rate should be reverted to 8%, as was the case under the Finance Act 2021, to promote digital inclusion, particularly among lower-income users who are disproportionately affected by high connectivity costs.
The telecom sector also called for exemption from all withholding taxes, similar to the treatment extended to the banking and oil sectors. The proposal emphasized that real-time advance tax payments under Section 147 of the Income Tax Ordinance, 2001, ensure continuous revenue flows without compromising the exchequer.
Furthermore, the industry seeks to make the 4% withholding tax on telecom services under Section 153(1)(b) adjustable rather than final. Given the capital-intensive nature and low margins typical of the industry, this tax often becomes a fixed burden rather than a prepayment of income tax.
The proposal also highlights a pressing need to establish a harmonized federal and provincial sales tax structure, especially tailored for the telecom industry, which currently grapples with inconsistent regulations and multiple tax regimes. A uniform service tax law with a single rate across jurisdictions would reduce compliance complexities and eliminate double taxation.
Another key demand is the abolition of advance tax on spectrum auctions and license renewals, noting that spectrum represents a temporary right of use rather than a physical commodity. The current tax regime is viewed as irrational and inconsistent with international practices, placing an unnecessary burden on operators.
The telecom industry also seeks the removal of a 5% regulatory duty on essential equipment like power systems and batteries, and requests that such items be excluded from retail valuation to cut costs and promote renewable energy use in network infrastructure.
Additionally, it has called for the exemption of duties and taxes on optic fiber imports and deployment, which it says will accelerate 5G readiness and improve network coverage.
Lastly, industry representatives urged the FBR to reconsider income tax withholding requirements under Section 152 for imports of telecom equipment, emphasizing the need to ease financial and procedural barriers to growth.