ISLAMABAD, May 15: The GSM Association, (GSMA), the global trade association for mobile phone operators, pushing for complete elimination of Rs500 SIM activation tax, said on Tuesday the move would fuel economic development and increase tax receipts across the wider economy.

“The government stands to gain more if they abolish the activation tax because it will result in greater usage of mobile phones in Pakistan and improve communication between businesses and their customers,” said Vice President, GSMA, Ricardo Tavares, during his presentation at a press conference at a local hotel.

Referring to a study by a leading consultancy, Mr Tavares, who was representing all major cell phone companies, like Mobilink, Paktel, Telenor Pakistan, Ufone and Warid, at the conference said that the elimination of activation tax of Rs500 on SIM cards would lead to an increase of between 3.6 per cent and 4.3 per cent in the gross domestic product (GDP) generated by Pakistan over the 10 years between 2007 and 2017.

“This economic growth, combined with growth in the overall taxes paid by the mobile sector, would boost government revenues over the 10-years period,” he said.

A series of studies commissioned by the GSMA had shown that levying special taxes on the mobile industry was counterproductive because rising mobile usage was a major engine of economic growth in developing countries, said Ricardo Tavares.

"While Pakistan has made great strides in improving access to communications over the past three years and tariffs are now among the lowest in the world, the activation tax remains a major barrier to connecting the two-thirds of Pakistanis who don't yet have a mobile phone."

Only 10 of the 100 counties in a recent global survey for the GSMA levied special taxes on SIM cards.

“Pakistan is the uncontested leader in Sought Asia with over 30 per cent of mobile penetration. Pakistan is past India, Bangladesh and Sri Lanka,” he said, adding, “There are eight times more mobile subscribers and fixed line subscribers.”The SIM activation tax was first introduced in Pakistan in 2001 at Rs2,000. It has since then been reduced twice - down to Rs1,000 in 2004, and Rs500 in 2005, he said, adding, “Following each reduction, there has been a significant rise in mobile penetration in Pakistan.”

The GSMA VP said that consumers in Pakistan continue to pay some of the highest mobile taxes in the world at 31 per cent of the total cost of owning and using mobile services, compared with 17 per cent on average worldwide.

Despite the high taxes, the cellular industry had been at the forefront of a telecommunications revolution in Pakistan. The industry invested close to $2 billion in the fiscal year 2005-06 alone, which according to the Pakistan Telecommunications Authority was 54 per cent of the total Foreign Direct Investment in Pakistan for that year.