Telecom sector has blamed the irrational tax/ inconsistent policies of the government over the exit of two Middle East investors from the country. Addressing a media roundtable on 'Telecom Taxation Impacting the Consumers,' Muhammad Aslam Hayat, Chief Corporate Affairs and Strategy Officer Telenor Pakistan said: "Finance Minister Ishaq Dar neither listens nor gives response to telecom sector's budget proposals, resultantly we have stopped submitting budget proposals for the second consecutive year," said Hayat, adding that two Middle East telecom investors namely Oman Telecommunications Co (Omantel) and Ooredoo, a Qatar-based telecom giant, have pulled out of Pakistani telecom market.

Pakistan telecom is one of the highly unpredictable sectors in terms of tax regime. Every year the government introduces finance bills that stipulate major changes in tax laws. These changes affect business plans for further investment in telecom sector, both in infrastructure and spectrum. He further said that Telenor invested $ 3.5 billion during last 11-12 years while it is spending around Rs 40 billion every year on up-gradation of its network, but it sent only $400 million dividends back. Mobilink has invested around $ 8 billion since 1993 but sent $110 million dividends back, he added.

Hayat said that Telenor is working in 13 countries and by investing in other countries, eg Bangladesh, they could get better returns. He said that four mobile operators participated in the spectrum auction held in 2014 and only one operator participated in the 2016 spectrum auction. However, due to non-conducive environment for investment, hardly a single mobile operator would participate in the upcoming auction.

He further said that telecom revenue remained Rs 455 billion in 2015-16, and of that contribution to national exchequer was Rs 158 billion, foreign direct investment was Rs 40 billion, and telecom investment was Rs 75 billion.

He said that taxes have to be paid by customers before they actually avail any telecom service and on average, a user spends Rs 2,520 on telecom services annually and gets worth for only Rs 1,598 while Rs 922 go to taxes. For the poorest 20 per cent population, the total cost of mobile ownership accounts for as much as one-fifth of average annual income.

The telecom consumers in Pakistan are paying 37 per cent tax for using mobile or internet facility, which is the highest and there is no sign of any reduction in such heavy tax system. According to the law in Pakistan, a person having less than Rs 0.4 million would not be taxed but here every mobile consumer is paying tax irrespective of his earning. The government even asked the telecom operators to collect IMEI tax from consumers, which currently the companies cannot collect. There is a 16% federal excise duty over transfer of money through mobile banking system of telecom operators and the government wants to introduce withholding tax over it.

Copyright Business Recorder, 2017