Telecom Operators Association (ToA) has put forward a comprehensive set of budget proposals for the fiscal year 2025-26, urging the government to introduce tax relief measures, amend existing policies, and exempt telecom operators from withholding taxes. The association has emphasized that excessive taxation, complex regulations, and financial constraints are hindering the telecom sector’s ability to expand digital infrastructure and contribute to Pakistan’s economic growth. The recommendations focus on easing the compliance burden on telecom companies, encouraging investment, and ensuring fair tax treatment for the industry.
One of the key demands is the reversal of the amendment in Section 147 of the Income Tax Ordinance, 2001, which grants tax authorities the power to reject advance tax estimates filed by telecom companies. ToA argues that this provision has created uncertainty, led to an increase in litigation, and disrupted business operations by allowing tax officials to challenge financial estimates submitted by telecom firms. The association is calling for a return to the previous system, where companies could file estimates without excessive interference from tax authorities.
Another significant concern raised by ToA is the restructuring of the Alternate Dispute Resolution Committee (ADRC) framework. The recent changes to the ADRC process make its decisions binding on both taxpayers and authorities, eliminating the option for companies to challenge unfavorable rulings. ToA is pushing for a restoration of the previous mechanism, where taxpayers had the right to appeal ADRC decisions, ensuring a more balanced dispute resolution process. The association believes this will help prevent unjust tax recoveries and provide a fairer legal environment for businesses.
A major demand from ToA is an exemption from all withholding tax provisions under the Income Tax Ordinance, similar to the relief granted to the banking and oil sectors. Telecom companies currently face withholding tax deductions on imports, services, utility bills, and corporate sales, making compliance unnecessarily complex. The association argues that eliminating these deductions will not affect government revenue since telecom firms already pay substantial quarterly advance taxes. ToA believes this move will streamline tax compliance and improve the financial health of telecom operators.
ToA has also urged the government to make the 4% withholding tax on telecom services adjustable, rather than treating it as a minimum tax. Under the current framework, companies must pay this tax regardless of profitability, which disproportionately affects businesses facing financial losses. By allowing companies to adjust this tax against their final liability, ToA believes the government can incentivize investment in network expansion and service improvements.
The association has also called for fairer treatment of compliant telecom operators. It has raised concerns over aggressive tax recovery measures, such as freezing bank accounts and sealing business premises, which can disrupt operations and harm the industry’s growth. ToA has recommended that such actions should only be taken after an independent appellate review to ensure that law-abiding companies are not unfairly penalized. This proposal seeks to create a more stable regulatory environment, where companies can operate without the constant fear of abrupt tax enforcement actions.
To address workforce challenges, ToA has proposed tax relief measures for telecom sector employees. The association highlights that rising income tax rates, coupled with inflation, have made it difficult to attract and retain skilled professionals in the industry. It suggests introducing sector-specific tax reforms, including inflation-adjusted tax brackets and lower withholding tax rates for employees, to support digital infrastructure development and sustain a skilled workforce.
ToA has also emphasized the need for reducing the high tax burden on telecom services. Currently, consumers pay a 15% advance income tax and a 19.5% Federal Excise Duty (FED) on telecom services, making mobile and internet access expensive. The association argues that lowering these taxes would encourage digital adoption, improve connectivity, and drive economic growth. By making telecom services more affordable, ToA believes the government can increase digital penetration across the country.
Another critical issue highlighted by ToA is the restriction on carrying forward minimum tax payments under Section 113 of the Income Tax Ordinance. Presently, companies can only carry forward their minimum tax credits for three years, which limits their ability to offset financial losses. ToA has requested an extension of this period to five years, citing the economic challenges telecom firms face due to fluctuating revenues and high operational costs. The association believes this change would provide much-needed financial relief to companies struggling with economic volatility.
The association has also called for the removal of regulatory duties on telecom power equipment and batteries, which are essential for maintaining network operations. Telecom operators rely heavily on lithium-ion and rechargeable batteries, particularly in the rollout of 5G technology. However, the sector faces a 5% regulatory duty on these imports, despite the fact that such equipment is not manufactured locally. ToA is pushing for the elimination of these duties to reduce network maintenance costs and improve service reliability.
Another key recommendation is the elimination of the regulatory duty on SIM card imports. Since Pakistan does not produce SIM cards locally, ToA argues that the 15% regulatory duty and 3.5% additional sales tax on their import is an unnecessary burden on both telecom companies and consumers. By removing these duties, the association believes the government can lower SIM card costs and promote digital accessibility.
ToA has also proposed reducing the 9% regulatory duty on essential telecom infrastructure equipment, such as RAN, Core, and transmission devices, which are crucial for Pakistan’s upcoming 5G rollout. High import costs for this equipment make network expansion expensive, slowing down progress in the telecom sector. The association has emphasized that lowering these duties will facilitate faster deployment of new technologies and improve overall service quality.
The proposals put forth by ToA highlight the urgent need for a more business-friendly regulatory framework that supports digital transformation in Pakistan. The telecom sector plays a crucial role in driving economic development, enhancing connectivity, and expanding financial inclusion. By addressing the taxation and policy challenges faced by telecom companies, the government can create an environment that fosters investment, innovation, and job creation.
The government is expected to review ToA’s recommendations, but it remains unclear which of these proposals will be accepted in the upcoming budget. Policymakers will need to balance the need for revenue generation with the long-term benefits of a thriving telecom sector. If implemented, these reforms could significantly improve the sector’s growth prospects, making telecom services more affordable and accessible to millions of Pakistanis.
