ISLAMABAD: The GSMA, a global mobile industry association with a membership of over 750 operators, has asked the government to reverse the recent tax hike on mobile services taken under the mini-budget, saying it is also damaging for the economy.

“We invite the Government of Pakistan to consider the removal of this increase in the withholding tax (WHT) from the mini-budget,” the GSMA stated in a letter.

The letter has been addressed to Finance Minister Shaukat Tarin, IT and Telecom Minister Syed Amin Ul Haque, FBR chairman Dr Muhammad Ashfaq and Pakistan Telecommunication Authority chairman Amir Azeem Bajwa.

It said the telecommunication sector was a key enabler for social and economic growth and Pakistan’s mobile market has significant potential, but current levels of mobile internet adoption, smartphone take-up and usage of digital services lag behind those of other countries in the region.

Regrets reversal of reforms to hit social and economic growth

“By 2023, it is projected that the economic contribution of the mobile industry in Pakistan could reach $24 billion, accounting for 6.6 per cent of GDP,” it added.

“However, we wish to express our deepest concern regarding the reversal of the tax reforms in the 2021-22 Finance Bill by increasing WHT from 10pc to 15pc in the mini-budget that has been approved by the cabinet,” it said.

The GSMA has said that the regressive tax creates a barrier to access mobile services and affects the poorest the most as it will be more difficult for them to claim these payments as an advance tax. This increase in sector-specific tax will stifle adoption and innovation, which fetters sustainable industry growth and the net economic benefits to the country.

At the same time, the GSMA has commended Pakistan’s tax reform measures that were approved in the budget 2021-22.

The government had announced to reduce WHT from 12.5pc to 10pc in the federal budget 2021-22 and further to 8pc in the next fiscal year.

The GSMA has said that removing this withholding tax would promote accessibility to connectivity to the low-income group.

It said that Pakistan has the widest gender gap of 34pc in mobile ownership and 43pc for mobile internet use as compared to the regional countries.

Sector-specific taxes, such as those on smartphones and data usage, influence retail prices and may have a strong impact on the poorest consumers, especially women, lessening their ability to become mobile broadband subscribers.

Connectivity has never been more important as the pandemic has highlighted its need and will continue to be even more essential moving forward, it observed.

“Due to its negative impact this increased tax levy presents a significant risk of the government achieving the Digital Pakistan vision,” the letter said.

Meanwhile, Energy Minister Hammad Azhar said 70pc of the smartphones used in the country was now locally assembled, according to the APP news agency.

“Three years after launching Device Identification Registration and Blocking System (DIRBS) and a year after we launched mobile manufacturing policy, 70pc of smartphones are now assembled in Pakistan,” he tweeted.

He said Samsung had also unveiled its first locally assembled smartphones. The next step would be to export the phones, he added.

Published in Dawn, January 27th, 2022