Telecom has also shown slow improvement during Q1.State Bank

ISLAMABAD ( ABRAR MUSTAFA )

Stat Bank of Pakistan reveled in Q1 report that due to heavily taxed on Mobile sector lower mobile and broadband usage in Pakistan. The report says that FY16 with increased number of broadband users; better cellular and teledensity;and decline in PTCL financial losses. PTCL a major contributor to value addition by communication services posted a lower consolidated loss of Rs 371 million during Q1FY16 compared to a loss of Rs 407 million in the same period last year. The number of broadband users though increased significantly, could not translate into increased number of data users due to price competition and high tax incidence in the telecom sector. The value addition by finance & insurance depends upon the performance of the banking sector which observed an improvement in Profit after tax increased to Rs 49.2 billion in Q1FY16, from Rs 41.5 billion in the corresponding period of last year. Key profitability indicators, e.g., return on assets (ROA) and return on equity (ROE), improved over the last year. The growth in earnings was achieved due to the placement of funds in government papers.

What is holding back mobile and internet density in Pakistan?

Despite being among top 10 countries of the world in terms of number of mobile users,share of broadband and mobile users in Pakistan is still low. The country presents a huge market of about 130 million people that needs broadband services; currently, there are 16.7 million broadband users.

This shows large untapped potential in the broadband segment. Beside other issues such as quality of services, complex price structure, and high charges of devices, heavy taxation in this sector is the major reason of lower mobile and broadband usage From the perspective of mobile operators, high cost of entry, costlier devices, poor fixed line infrastructure, and taxation on imported equipment hinder the

new investment necessary for the expansion of such services to the unserved areas of the country. Mobile sector is heavily taxed in Pakistan, impacting devices, usage and sim cards. Following are the key taxes that directly impact consumers and providers of mobile industry in Pakistan: percent GST on 24 mobile services;14 percent withholding tax on mobile services;Custom duty of Rs 250 on mobile handsets On Broadband Internet Services, the tax rate is 19.5 percent in Punjab for more than 2 mbps speed. In Sindh the tax is 18 percent if broadband bill exceeds Rs 1500;10 percent duty on import of equipment used for voice reception, switching and routing of data etc.

  • 19.5% GST on mobile services; 14 percent withholding tax on mobile services;
  • Custom duty of Rs 250 on mobile handsets
  • On Broadband Internet Services, the tax rate is 19.5 percent in Punjab for more
  • than 2 mbps speed. 30 In Sindh the tax is 18 percent if broadband bill exceeds Rs 1500;
  • 10 percent duty on import of equipment used for voice reception, switching and
  • routing of data etc.
  • Corporate tax of 32 percent.
Data services or mobile internet have been exempted from taxes all over the world because of its benefits to masses and its effects on social developments and economic growth. Studies show that increased internet usage contributes positively to country’s economic growth. Based on an analysis of 120 countries, the World Bank has indicated that for every 10 percent increase in the penetration of broadband services, there is an increase in economic growth of 1.3 percentage points Another study also found that the internet plays a positive and significant role in economic growth.Therefore we believe heavy taxation on mobile services in Pakistan does not bode well for economic growth in the country