LAHORE - As the Punjab government is presenting its budget on Friday (today), the centre has proposed the provincial government to withdraw the newly-introduced tax of 19.5 per cent on data services and broadband internet, as the foreign based parent companies of telecom operators have warned the federal government of withdrawing the investment made recently on 3G/4G.

Parent groups of Pakistani cellular operators including China Mobile (Zong), Etisalat (Ufone), Abu Dhabi Group (Warid), Mobilink and Telenor have showed serious concerns through their letters to the Prime Minister to reverse the decision of taxing internet imposed recently through an SRO, as their huge investment of billions of rupees on 3G and 4G is now on stake. Following these letters to the Prime Minister and other policy-makers, the Chairman of Pakistan Telecommunications Authority Syed Ismail Shah has also criticized the taxation structure of the Telecommunications and ICT industries. “There is a need to reduce the tax burden on fast-growing, high-potential sectors like Telecom and ICT, to give them the freedom to grow faster, enrich the national economy with healthy revenue streams and create new employment opportunities.”

The parent companies of the Pakistani cellular operators stated that imposing taxes on data services only a year after the successful 3G/4G spectrum auction will not only hamper economic growth but will also adversely impact the government’s initiative for the proliferation of mobile broadband in Pakistan. Besides slowing down growth of broadband technology and network rollout, the proposed taxation would also have a negative impact on future spectrum auction and investments in the country’s telecom market, they stated.

Foreign shareholders of Pak cellular industry have jointly urged Pakistani government to relieve telecom industry of internet taxes. They said that taxes on Pakistani telecom services are already high, adding that in fact they are ranked as 4th highest in the whole world.

According to them, the customers of the mobile phone were facing a wrath of taxes burden after the Punjab government introduced tax of 19.5 per cent on data services and broadband internet.

The tax on data services was unique and rare in the world which was levied only in Bhutan at the rate of only 5 percent. The imposition of the tax rates also caused uproar throughout the IT industry and mobile broadband users which have been already bracing huge taxes on telecom sector including discriminatory GST of 19.5 percent, 14 percent withholding taxes, and now another tax on data services. Throughout the world, the data services have been exempted from the taxes because of its unparallel benefits to masses and its ripple effects on social developments and economic growth.

PASHA, the representative body of software industry, also said the move to place a 19.5% tax on 3G/4G and mobile data services in Punjab should be seen as another nail in the coffin for users as well as entrepreneurs who are trying to innovate using technology.

Technology is a great equalizer for developing countries like Pakistan. Our government needs to be smarter allowing us to not only access that technology but also to use it to innovate, to attract business, to create employment and provide solutions to problems that exist in our society. We can’t do that if tax after tax is imposed on this nascent but growing sector.

The growth in the usage of technology for education, health, communication and business solutions will come to a standstill at a time when it should be taking off. The e-commerce business, which is finally beginning to grow because of the launch of some online payment solutions, will come to a complete halt. It is hoped that the sense will prevail and Punjab, Sindh and KP will all remove this tax before it kills the tech sector and the growth of ICT usage in this country.