Telecom Operators Fight Proposed Fines and Taxes

Telecom Operators Fight Proposed Fines and Taxes

Islamabad, June 23, 2024 – The Telecom Operators Association is locked in a battle against proposed penalties and tax measures outlined in the recently unveiled Finance Bill 2024-25.

In a letter addressed to the National Coordinator of the Special Investment Facilitation Council (SIFC), Lt General Sarfraz Ahmed, the association has urged the abolishment of these provisions.

Objections to ITGO Fines and Advance Tax Collection

The primary concerns of the telecom operators lie in two key sections of the Finance Bill: Section 114-B and Section 236. These sections propose imposing fines on the telecom sector under the Income Tax General Orders (ITGO) and requiring them to collect a 75% advance tax on mobile services for non-compliant tax filers.

The association highlights the operational difficulties associated with these measures. They emphasize their inability to distinguish between compliant and non-compliant tax filers within their current systems, making the 75% advance tax collection impractical. Furthermore, they object to the proposed ITGO fines, viewing them as “discriminatory and unjust.” The association argues that the telecom sector should not be held responsible for enforcing ITGO regulations and that the hefty fines associated with non-compliance deter foreign investment.

Industry Advocacy and Calls for Collaboration

The telecom operator letter follows earlier efforts to voice their concerns. The association has already approached relevant government authorities, including the Finance Minister and the Federal Board of Revenue (FBR) chairperson. Additionally, they received support from the Senate Standing Committee on Finance, which recently endorsed the withdrawal of the proposed ITGO amendment.

The association, while expressing frustration with the proposed measures, remains committed to collaborating with the FBR. Their letter acknowledges the cooperation extended by the Finance Minister and FBR Chairperson and pledges the industry’s support in achieving the FBR’s goals “wherever possible.”

Broader Impact on Digitalization

The telecom operators also raises concerns about the potential negative impact of proposed sales tax increases on handsets. They argue that imposing an 18% sales tax on handsets below $500 and a 25% tax on those exceeding $500 will hinder broadband penetration and impede Pakistan’s digitalization efforts. By making mobile devices less affordable, these taxes could limit access to essential services that rely on internet connectivity, such as banking, e-commerce, and government services.

The telecom operators fight against the proposed penalties and taxes highlights the challenges faced by Pakistan’s telecom industry. The coming days will be crucial as the government weighs these concerns against its revenue generation goals and its commitment to fostering a robust and accessible digital economy.