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Business Recorder
05-06-2025
- Business
- Business Recorder
Pakistan telecom sector seeks sales tax reduction on services
ISLAMABAD: Telecom sector has proposed the government to reduce sales tax on telecom services from the current 19.5 percent - highest compared to other sectors to 16 percent in the upcoming budget 2025-26, besides harmonise across the country whereby all provinces and federal capital should have same rate. IT and Telecom sector submitted the budget proposals to the government which also proposed Advance tax may be reinstated to improve the purchasing power of customers as majority of the customers are below taxable limit. The sector proposed abolishment of advance income tax at 10% under Section 236A of ITO 2001 on auction of new or renewal of Telecom licenses, while justifying that Advance tax on auction of license inflates the cost of doing business and cost of capital for telecom sector, hindering 4G/5G and rural expansion. The proposals maintained that Cellular Mobile Operators are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites which are thousands in numbers as a result this increases the cost and complexity in compliance and an additional administrative burden for the telecom sector. Verification of claim of this tax collection on bills by tax authorities is also not possible and can save authorities from operational burden. Further, withholding tax deducted from telecom services is treated as minimum tax which is against the principle of taxation as this is payable even in loss making years. Further, current recovery measures are very harsh creating business disruptions and shaking taxpayers' confidence. The sector proposed the exemption from deduction/collection of withholding taxes by adding a clause in 2nd Schedule of ITO 2001. In case of acceptance of this, proposals mentioned at point b and c below will be redundant. They further proposed that withholding tax on telecom services at 4% u/s 153 to be adjustable instead of minimum tax. The shift from an adjustable income tax to a minimum tax has effectively reclassified income tax from a direct tax to an indirect tax. This is because the amount of tax payable is no longer tied to the actual income earned, but rather a fixed charge that applies uniformly, irrespective of the company's profitability. The sector proposed for increase carry forward period of minimum tax credit u/s 113 from 3 years to 5 years and bring it back to the position prior to Finance Act 2024. Pay back period of telecom sector is very slow and it takes longer time to recover the return on investment ranging from 8 to 10 years. So limiting the credit to 3 years is not sustainable for loss making companies, they added. The proposal also included removal of the regulatory duty rates on telecom power equipment which are not locally manufactured. Moreover, telecom services sector should be exclude from retail price list because they don't import the goods for direct sale. Aamir Ibrahim, CEO Jazz and Chairman Telecom Operators Association said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. Overburdening telecom sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognise telecom as the digital backbone of every other sector and treat it as such in our fiscal policies,' said CEO Jazz while talking to this correspondent. Talking about the role of telecom in the country' digital future he said that connectivity today is as essential as roads and power grids. 'Telecom is the infrastructure that powers e-commerce, mobile banking, online learning, telehealth, and even public service delivery. Yet, we continue to treat it as a revenue stream instead of a strategic enabler. If we are serious about building a future-ready Pakistan, we need to start seeing telecom as a development multiplier, not a luxury,' he added. He further said that Pakistan's tax burden is disproportionately carried by a narrow group of compliant individuals and industries. To build a sustainable digital economy, we need to widen the tax net—bringing more participants into the formal economy — rather than repeatedly taxing those who are already contributing. Placing additional pressure on the formal, documented sectors, especially one as foundational as telecom, only discourages investment, slows innovation, and undermines long-term growth, he added. Ibrahim said that every tax on telecom is effectively a tax on opportunity. Whether it's a student in rural Balochistan attending a virtual class or a woman entrepreneur using mobile payments to grow her home business, digital access is a lifeline. A more forward-looking fiscal policy would reduce barriers to connectivity, making digital inclusion a reality for all Pakistanis. 'Telecom is not a luxury — it is a critical utility, much like electricity or clean water. It enables students to learn, entrepreneurs to sell, farmers to access market information, and patients to receive remote healthcare. Overburdening this sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognize telecom as the digital backbone of every other sector and treat it as such in our fiscal policies', CEO Jazz added. Ibrahim further said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. A rationalized tax regime, coupled with efforts to document the informal economy, would yield more sustainable revenues for the state without compromising the growth of the digital ecosystem. Copyright Business Recorder, 2025
Business Recorder
05-06-2025
- Business
- Business Recorder
Telecom sector seeks sales tax reduction on services
ISLAMABAD: Telecom sector has proposed the government to reduce sales tax on telecom services from the current 19.5 percent - highest compared to other sectors to 16 percent in the upcoming budget 2025-26, besides harmonise across the country whereby all provinces and federal capital should have same rate. IT and Telecom sector submitted the budget proposals to the government which also proposed Advance tax may be reinstated to improve the purchasing power of customers as majority of the customers are below taxable limit. The sector proposed abolishment of advance income tax at 10% under Section 236A of ITO 2001 on auction of new or renewal of Telecom licenses, while justifying that Advance tax on auction of license inflates the cost of doing business and cost of capital for telecom sector, hindering 4G/5G and rural expansion. The proposals maintained that Cellular Mobile Operators are subject to deduction/collection of withholding of income tax on large number of transactions e.g. electricity bills of cell sites which are thousands in numbers as a result this increases the cost and complexity in compliance and an additional administrative burden for the telecom sector. Verification of claim of this tax collection on bills by tax authorities is also not possible and can save authorities from operational burden. Further, withholding tax deducted from telecom services is treated as minimum tax which is against the principle of taxation as this is payable even in loss making years. Further, current recovery measures are very harsh creating business disruptions and shaking taxpayers' confidence. The sector proposed the exemption from deduction/collection of withholding taxes by adding a clause in 2nd Schedule of ITO 2001. In case of acceptance of this, proposals mentioned at point b and c below will be redundant. They further proposed that withholding tax on telecom services at 4% u/s 153 to be adjustable instead of minimum tax. The shift from an adjustable income tax to a minimum tax has effectively reclassified income tax from a direct tax to an indirect tax. This is because the amount of tax payable is no longer tied to the actual income earned, but rather a fixed charge that applies uniformly, irrespective of the company's profitability. The sector proposed for increase carry forward period of minimum tax credit u/s 113 from 3 years to 5 years and bring it back to the position prior to Finance Act 2024. Pay back period of telecom sector is very slow and it takes longer time to recover the return on investment ranging from 8 to 10 years. So limiting the credit to 3 years is not sustainable for loss making companies, they added. The proposal also included removal of the regulatory duty rates on telecom power equipment which are not locally manufactured. Moreover, telecom services sector should be exclude from retail price list because they don't import the goods for direct sale. Aamir Ibrahim, CEO Jazz and Chairman Telecom Operators Association said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. Overburdening telecom sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognise telecom as the digital backbone of every other sector and treat it as such in our fiscal policies,' said CEO Jazz while talking to this correspondent. Talking about the role of telecom in the country' digital future he said that connectivity today is as essential as roads and power grids. 'Telecom is the infrastructure that powers e-commerce, mobile banking, online learning, telehealth, and even public service delivery. Yet, we continue to treat it as a revenue stream instead of a strategic enabler. If we are serious about building a future-ready Pakistan, we need to start seeing telecom as a development multiplier, not a luxury,' he added. He further said that Pakistan's tax burden is disproportionately carried by a narrow group of compliant individuals and industries. To build a sustainable digital economy, we need to widen the tax net—bringing more participants into the formal economy — rather than repeatedly taxing those who are already contributing. Placing additional pressure on the formal, documented sectors, especially one as foundational as telecom, only discourages investment, slows innovation, and undermines long-term growth, he added. Ibrahim said that every tax on telecom is effectively a tax on opportunity. Whether it's a student in rural Balochistan attending a virtual class or a woman entrepreneur using mobile payments to grow her home business, digital access is a lifeline. A more forward-looking fiscal policy would reduce barriers to connectivity, making digital inclusion a reality for all Pakistanis. 'Telecom is not a luxury — it is a critical utility, much like electricity or clean water. It enables students to learn, entrepreneurs to sell, farmers to access market information, and patients to receive remote healthcare. Overburdening this sector with excessive taxation is not just economically counterproductive — it's socially regressive. We must recognize telecom as the digital backbone of every other sector and treat it as such in our fiscal policies', CEO Jazz added. Ibrahim further said that over-taxation of telecom not only hurts affordability for consumers, it also weakens investor confidence in a sector that requires constant innovation and infrastructure upgrades. A rationalized tax regime, coupled with efforts to document the informal economy, would yield more sustainable revenues for the state without compromising the growth of the digital ecosystem. Copyright Business Recorder, 2025
Business Recorder
12-05-2025
- Business
- Business Recorder
Automated income tax refund system: FBR has failed to enforce IHC's directive
ISLAMABAD: The Islamabad High Court's landmark judgment for effective enforcement of an automated income tax refund system remains unimplemented by the Federal Board of Revenue (FBR) despite assurances from Member (Policy) FBR The court's directive aimed to facilitate taxpayers and minimize interaction with tax functionaries, but the FBR has failed to take concrete steps in this regard. According to tax lawyer Waheed Shahzad Butt, the FBR's failure to enforce the court's directive appears to be a case of 'planned negligence,' allowing certain field formations within the department to continue obstructive practices when there is an issue of returning taxpayer money in the shape of tax refunds. Automated income tax refund system: FBR fails to implement IHC judgement Instead of embracing automation and transparency as directed by the IHC, some FBR officials are playing a hide-and-seek game with refund claimants. This deliberate inaction undermines taxpayer trust and perpetuates a corrupt manual culture that the court sought to eliminate. The FBR demanded $25 million from the donor agency to effectively enforce an automated tax refund system under the ITO 2001. The FBR submitted a report titled 'Findings and Recommendations of Committee for Effective Enforcement of Section 170A' before the IHC in a public interest petition. Report submitted by the FBR revealed that the FBR's e-portal had no direct electronic linkage with the biggest government withholding agents i.e. Accountant General Pakistan Revenues (AGPR), which deducted income tax on gross salary of the government employees. This is perhaps the most glaring impediment in the way of enforcement of automated tax refunds process. Tax deducted by other withholding agents such as power distribution companies (Discos), excise and taxation departments, educational institutes, travel agents, airlines, Sui Northern Gas Pipelines Limited (SNGPL), Sui Southern Gas Company Limited (SSGCL), telephone and internet service providers, semi-autonomous government entities, government departments etc was not visible in the FBR's database. The judgment in question was intended to streamline the refund process through automated means, reducing human intervention and curbing discretionary power. However, despite the passage of time, the FBR has yet to roll out the mandated system, and no official explanation has been provided for the delay, Waheed Butt added. Copyright Business Recorder, 2025
Express Tribune
26-03-2025
- Business
- Express Tribune
Telecom sector seeks tax break
Listen to article The Telecom Operators Association has called for addressing several issues including tax exemptions in the upcoming budget for fiscal year 2025-26 for smooth activities of telecom firms. In a letter sent to the finance minister, the association said that the telecom industry plays a vital role in economic growth, contributing significantly to revenue generation, digital inclusion and employment. However, several fiscal and policy challenges need to be addressed to ensure sustainable growth and advancement of the sector. In this regard, it has submitted key recommendations for the budget. The industry has demanded exemption from withholding taxes. Cellular mobile operators (CMOs), as major utility providers, face complex and costly withholding tax compliance due to a large number of transactions subject to income tax deductions under the Income Tax Ordinance (ITO) 2001, including utility bills, sales to corporate customers and imports. The current withholding tax framework creates significant administrative challenges and negatively impacts business environment in the telecom sector. To enhance tax compliance efficiency and foster a more business-friendly environment, the telecom industry has proposed extension in exemption from all withholding tax provisions under the ITO 2001. This will simplify the advance tax payment process, allowing CMOs to make payments of quarterly installments under Section 147 of the ITO. This measure will not result in any revenue loss to the FBR as telecom companies will continue to make quarterly advance tax payments. Adjustment to withholding tax The Finance Act 2015 introduced a significant change to Section 153(1)(b) of the ITO 2001, replacing adjustable withholding tax with a minimum tax on services provided by telecom companies and other service providers. This shift has effectively turned income tax from a direct tax into an indirect tax, as the tax payable is no longer tied to actual income but is instead a fixed charge applied uniformly, regardless of profitability. The 4% minimum tax rate imposed on telecom services is disproportionately high and negatively impacts the profitability of telecom companies, which are already struggling due to discriminatory taxation and financial difficulties. The administrative burden has also increased, as telecom companies now face the cumbersome task of collecting tax deduction certificates from thousands of corporate customers nationwide. To ease financial difficulties and reduce tax costs, it is recommended that the withholding tax be made adjustable once again. The companies demanded that taxpayers who comply with their obligations should not be subjected to unfair practices or undue pressure. The telecom association said that actions such as freezing bank accounts or halting business operations by sealing premises should only be undertaken when absolutely necessary and justified. These measures can cause undue disruptions and have adverse effects on the economy. While enforcement powers are necessary to recover due taxes from defaulters, current provisions should address the genuine concerns of compliant taxpayers. It said that recovery powers should distinguish between habitual tax defaulters and genuine taxpayers. Exaggerated tax demands and forced recoveries undermine the business environment, investor confidence, and foreign direct investment. Recovery proceedings should not be initiated until an appeal has been decided by at least one independent appellate forum, such as the Appellate Tribunal. The association has urged tax relief for telecom sector employees saying the surge in income tax on employee salaries, coupled with hyperinflation, has made it increasingly difficult for the industry to attract and retain top talent. High income tax burdens, combined with rising inflation, significantly reduce disposable income, making the sector less appealing to skilled workers essential for digital infrastructure and economic growth. To balance revenue collection with workforce retention, sector-specific tax reforms should be introduced, including inflation-indexed tax brackets, increased exemptions for essential expenses, lower withholding tax rates, and special tax incentives for telecom professionals. They asked for reduction in income tax and FED rates. The applicable income tax under Section 236 of the ITO 2001 is currently 15%, up from 12.5% via the Finance (Supplementary) Act 2022. Previously, the tax rate was set to decrease to 8% from 2022 onwards. Additionally, under the Federal Excise Duty (FED) Act 2005, the applicable rate has risen from 16% to 19.5%. Since telecom products are already priced inclusively of taxes, reducing these rates would encourage revenue growth rather than suppress it.
