ISLAMABAD: The IT minister has expressed dismay over “limited relief” given to the sector and “negligible tax support” to the telecom industry.

The industry has also issued unwelcoming statements over budgetary measures announced by the finance minister.

Responding to announcements made by Finance Minister Miftah Ismail in parliament on Friday, Minister for IT and Telecommunications Syed Aminul Haque said the finance division should immediately consider proposals sent by the IT ministry to boost the sector and maximise its potential.

“The decision to remove withholding tax and some other conditions on the IT industry as well as the removal of capital gains tax from those who invest in the IT sector may be beneficial, but these measures are insufficient,” Mr Haque said in a statement after Mr Ismail’s speech in parliament.

Telecom sector says no business case for further investment unless average revenue per user rises to at least $2

“It’s important to understand that the telecom sector was the backbone of the IT sector, as the majority of the IT businesses were based on the telecom and data services,” he said. “Without communication facilities, how can we achieve targets set for the IT sector, which depends entirely on global connectivity?”

‘Highly taxed market’

Similarly, the telecom industry has also expressed concerns over high tax rates and other charges and has informed the finance ministry about the “stringent conditions” imposed by policymakers and regulators.

“Our consumers are taxed at one of the highest rates in the world,” Telenor CEO Irfan Wahab Khan told Dawn and lamented that high taxes had also raised spectrum and license renewal costs.

He said the industry was working in an uncertain and unpredictable business environment, especially concerning taxes, spectrum road map, no-objection certificate (NoC) fees and right-of-way issues.

The telecom industry has highlighted that the cost of doing business has gone significantly higher under various heads, including spectrum fees that have gone up from $291 million to $486m, whereas taxes have jumped to 34.5 per cent over the years, “making Pakistan one of the highly taxed telecom markets”.

The GSMA — an organisation that represents the interests of mobile network operators across the world — has also reported that Pakistan is ranked 235 out of 238 countries in terms of lowest average revenue per user (ARPU) per month, which has dropped from $9 in 2003 to around $1 by June this year. The ARPU is a key tool for measuring the financial health of cellular mobile operators (CMOs).

Meanwhile, Jazz CEO Aamir Ibrahim said the government had to lower taxes for the industry to make telecom services affordable for consumers. By doing this, the government would also gain from the overall economic growth due to the contribution of telecom and internet in growth, he said.

“The relevant policymakers need to ensure that the sector stays sustainable through assured return on investment, and if the ARPU is not at least $2 by next year, there will be no business case to further invest in enhancing quality or coverage,” Mr Ibrahim said.

Amir Allahwala, president of the Pakistan Mobile Phone Manufacturers Association, said that while it was essential to support tough decisions taken in the budget, mobile manufacturing was a hi-tech industry with the help of foreign direct investment from Chinese mobile phone brands.

Therefore, it was imperative to ensure continuity in leadership and consistency in policy to ensure the success of mobile manufacturing in the country.

Published in Dawn, June 26th, 2022