Three of Pakistan’s operators have hit out against the government’s proposed sales tax on mobile handsets and SIM cards.
Mobilink, Telenor and Warid have deemed the Federal Board of Revenue’s (FDR) device tax “irrational, illogical, arbitrary and incoherent”. They note that it not only goes against the country’s constitution, but would also be highly difficult to implement.
Pakistan already taxes the import and supply of mobile handsets, but avoidance of this duty is common enough to be problematic. In an effort to combat this, the FDR has proposed extending import duty to SIM cards.
However, the three operators – which collectively have a market share of 64% - have written to the FDR explaining that meeting the new tax requirements would be costly for operators without delivering a benefit. They argue that there would be a boom in devices with fake IMEI numbers as consumers look for ways to avoid the tax, and that this in turn would create tracking challenges for law enforcement agencies.
A joint statement from the operators read: “The only solution for the government is to crack down on smuggling and charge sales tax at the import and supply stage.”
Pakistan’s Ministry of Information Technology recently suggested that the telecoms sector should receive tax relief after a year of falling revenue which has been ascribed to a prior tax hike. Q3 revenues were down 12% on the previous quarter to PKR102 billion ($98 million).
A ministry committee founded to examine the impact of higher-rate taxes noted that high tax bills had adversely affected operator revenue and diminished their interest in acquiring further 3G/4G spectrum – much to the chagrin of the government, which is keen to hold fresh auctions.