ISLAMABAD: The telecom consumers in Pakistan were paying 37 percent tax over using mobile or internet facility, which was highest and there was no sign of reduction in such heavy tax system. These views were expressed during a round table discussions on “Telecom Consumers Taxations” held here on Thursday by the telecom industry. The mobile operators were of the view that the federal and provincial governments have introduced different forms of taxation, which the consumers have no option but to pay. Keeping in view the tough situation, some of the telecom companies like Warid, Oman Tel and some other put out from the industry. The participants were informed that the government point of view about the taxation was that it has limited tax system but this was not the mistake of telecom operators. According to the law in Pakistan, a person having less than Rs0.4 million would not be taxed but here every mobile consumers were paying irrespective of their earning. The government even asked the telecom operators to collect IMEI tax from consumers, which currently, the companies could not collect. There was 16% federal excise duty over transfer of money through mobile banking system of telecom operators and the government wanted to introduced withholding tax over it. The telecom industry would forward some demands to the government for the upcoming budget for tax reduction/elimination, which if implemented would not reduce the government revenue in long run. The participants were informed that telecommunications was a driver of economic progress and irrational taxation on this sector could not only discourages use of telecom services but also restricts investment and threatens growth in GDP, productivity, and job creation. Increased taxes on telecom sector might serve as a short-term objective of the government but it would have a potential long-term negative impact on economic growth. Telecom consumers in Pakistan contribute significant tax revenue to the government. These contributions include the GST/FED on voice, data and banking services; advance tax; devices taxes; and SIM issuance tax While the telecom consumers, falling in tax net, should be subjected to taxes, a balance was needed between short-term revenue schemes and long-term strategies to support overall economy and growth. Telenor sector was deregulated in 2004 after which it exhibited tremendous growth. Teledensity in terms of subscriptions grew from 8% to 71% while the subscriptions grew from 12 million to 140 million. It was estimated that 90 million people in Pakistan own a mobile which leaves over half the population of the country without the access to telecom services. In today’s age telecom services were the basic infrastructure for any country and reaching out to un-served population could provide a boost to Pakistan’s economy. However, that was only possible if telecom services were affordable for the masses to consume, and for the operators to provide. The current level of taxation on the sector was hampering further growth as well investment in telecom services. GST on telecom in Sindh is 19% and 19.5% in other provinces, while the level of GST on other services and sectors was 13%-16%. Similarly FED on telecom services was 18.5% while it was 16% for other services. Sales tax rate of 19% on telecom was one the highest in Pakistan, second only to Uzbekistan among Asian countries. In Myanmar it was as low as 5%. Pakistan neighboring countries India and Iran have a sales tax on telecom of 14% and 8% respectively. Withholding tax on telecom at 14% was one of the highest among all sectors with most sectors paying WHT in the range of 1-5%. Together GST/FED and WHT make up a staggering 69% of total payments by mobile operators excluding the corporate tax. On Global Paying Taxing Index, Pakistan ranks 156 which is primarily due to inefficiency, inequity and complexity of tax structure prevalent in the country. Minor adjustments to taxation on telecom will not only benefit the economy and society, but will also offset reduced fiscal income by additional revenues generated from increased penetration. As an example, bringing GST/FED to 17% alone can create 1.8 million additional connections; increase GDP by $1.2 billion and total economy by $480 million and generate 4,200 jobs by 2021. Similarly removing SIM sales tax and eliminating annual license fees has the potential to add 1.2 million connections, Increase GDP by $800 million and generate 4,500 jobs. Pakistan government acknowledged that sharing the tax burden between sectors could add another 3-4% to the tax-to-GDP ratio in the short run and up to 6% in the medium term. In Pakistan Telecom was one of the highly unpredictable sectors in terms of tax regime. Every year the government introduced finance bill that comprised major changes in tax laws. These changes effected the business plan for further investment in telecom sector both in infrastructure and spectrum. In financial year 2013-14 the government increased the rate of Advance WHT on telecom services from 10% to 15%. This change resulted in decrease in average revenue per subscribers effective long term business plans of the telecom companies. Later on from 2014-15 this rate was reduced to 14%. Another instance was when the Government, in May 2015, levied sales tax @ 19.5% on data. This new tax directly affected the growth and penetration of digital inclusion in Punjab. Soon after the introduction of this tax telecom and other related industries have a meeting with Punjab tax authority and finance minister Punjab for abolishment of sales tax in Punjab. After lot of debates and discussions finally in Nov ’15 Government of Punjab abolished data tax in Punjab.