“Telecom is the digital backbone of every other sector and treat it as such in our fiscal policies.”
A recent proposal by the IT and Telecom sector to the government has shed light on the sector’s concerns about over-taxation and the need for reforms to boost economic growth and improve the quality of life for citizens. The sector has proposed reducing the sales tax on telecom services from the current 19.5% to 16% in the upcoming budget 2025-26, as well as harmonizing the tax rates across the country.
Harmonization of tax rates: The proposal emphasizes the need for uniform tax rates across all provinces and the federal capital to reduce compliance costs and increase economic efficiency.
Reduction of sales tax: The sector has proposed reducing the sales tax on telecom services from 19.5% to 16%, which is the current rate in the country.
Abolishment of advance tax on auction of new or renewal of telecom licenses: The sector has proposed abolishing the 10% advance tax on auction of new or renewal of telecom licenses, citing that this tax inflates the cost of doing business and hinders the expansion of 4G/5G services.
Exemption from deduction/collection of withholding taxes: The sector has proposed exempting cellular mobile operators from the deduction/collection of withholding taxes on large numbers of transactions, such as electricity bills for cell sites.
Adjustment of withholding tax on telecom services: The sector has proposed adjusting the withholding tax on telecom services from 4% to an adjustable minimum tax, which would reduce the administrative burden on the sector.
The sector has also proposed increasing the carry-forward period of minimum tax credit from 3 years to 5 years, as well as removing the regulatory duty rates on telecom power equipment. Additionally, the sector has requested that telecom services be excluded from the retail price list, as they do not import goods for direct sale.
Reasons for the proposal
Telecom sector’s response to over-taxation
Over-taxation hurts affordability for consumers
The sector argues that over-taxation increases the cost of doing business, hinders the expansion of 4G/5g services, and weakens investor confidence.
Over-taxation is socially regressive
The sector believes that telecom is the digital backbone of every other sector and that over-taxation is unfair and regressive.
Over-taxation hinders innovation and growth
The sector argues that excessive taxation discourages investment and slows innovation in the sector.
Aamir Ibrahim, CEO of Jazz and Chairman of the Telecom Operators Association, emphasized the need for a rationalized tax regime and the importance of recognizing telecom as the digital backbone of every other sector. He stated that telecom is essential for economic growth and development, and that over-taxation hinders this process. “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.”
Ibrahim further emphasized that the current tax burden disproportionately affects a narrow group of compliant individuals and industries. He suggested that the government should widen the tax net to bring more participants into the formal economy and reduce the burden on the formal, documented sectors. “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.”
In conclusion, the telecom sector’s proposal highlights the need for a rationalized tax regime and the importance of recognizing telecom as the digital backbone of every other sector. The sector’s arguments emphasize the negative impact of over-taxation on affordability, innovation, and growth. The government should consider the sector’s proposals to promote economic growth and improve the quality of life for citizens.
