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The Global System for Mobile Communications Association (GSMA) has issued a recommendation for the Pakistani government to significantly reconsider the prevailing mobile sector taxes.
The association argues that the current elevated tax rates are acting as a substantial impediment to the growth of the mobile industry, consequently slowing down the nation’s overarching digital transformation agenda and limiting economic opportunities for its citizens.
The GSMA report underscores the pivotal role of the mobile sector in today’s interconnected world, particularly in emerging economies like Pakistan. Mobile connectivity serves as a foundational layer for a multitude of digital services, including e-commerce, online education, telemedicine, and digital financial services. However, the report highlights that the affordability of these essential mobile services and devices is severely undermined by the existing high tax burden.
The Detrimental Impact of High Mobile Sector Taxes
Specifically, the GSMA points to the detrimental impact of the 15% Advance Income Tax and the 19.5% sales tax levied on mobile services. These mobile sector taxes, according to the report, create a significant barrier for a large segment of the population, particularly those in lower-income brackets, preventing them from fully participating in the digital economy. This affordability challenge directly contributes to the substantial usage gap observed in Pakistan, where many individuals in areas with network coverage are still unable to utilize mobile internet services.
The GSMA contends that a rationalisation of the mobile sector taxes would yield significant positive outcomes. By reducing the financial burden on consumers, mobile service adoption and usage would likely surge, leading to increased revenue for mobile operators in the long run. Furthermore, greater affordability would foster digital inclusion, empowering more citizens with access to vital online resources and opportunities. This, in turn, would stimulate economic activity across various sectors and contribute to overall GDP growth.
Moreover, the GSMA suggests that lower mobile sector taxes would incentivize greater investment in network infrastructure and technological advancements by mobile operators. With a more favorable fiscal environment, these companies would be better positioned to expand coverage, enhance network quality, and deploy next-generation technologies, further accelerating Pakistan’s digital transformation journey.
