The Ministry of Information Technology and Telecommunication has submitted a comprehensive set of fiscal relief proposals to the federal government ahead of the Budget 2026-27, calling for a significant reduction in the tax and duty burden on Pakistan’s telecom sector to accelerate 5G rollout, attract fresh investment, and improve digital connectivity across the country. The proposals, shared with sources ahead of the budget announcement, include exemption from withholding tax, lower import duties on telecom equipment, and reduced taxes on components used in local mobile phone manufacturing and assembly.
The ministry pointed to the telecom sector’s substantial economic contribution as justification for the proposed relief, noting that the industry invested nearly $5 billion over the past five years and contributed approximately Rs1.7 trillion in taxes to the national exchequer during the same period. The sector currently generates close to Rs400 billion in annual taxes and provides services to nearly 200 million subscribers nationwide. Ministry officials also referenced the sector’s recent $510 million commitment for spectrum acquisition to support next-generation mobile services including the 5G rollout currently underway across 22 cities.
On the withholding tax front, the ministry has recommended removing the current 6 percent withholding tax imposed on telecom companies, arguing that the sector’s strong compliance record makes the tax unnecessary and that its removal would improve liquidity and encourage further investment in network expansion and technological upgrades. Officials noted that telecom operators currently pay taxes in advance and then wait months for adjustments through the reconciliation process, creating financial pressure that affects cash flow and constrains capital available for infrastructure deployment. The ministry’s position is that treating a fully compliant sector to an advance tax mechanism designed for less transparent industries creates an unfair administrative burden that should be removed in the interest of encouraging the investment the country needs.
The ministry also proposed reducing customs duties, additional customs duties, and regulatory duties on imported telecom equipment, arguing that telecom infrastructure has become an essential enabler of economic activity, education, healthcare, and public services and can no longer be treated in the same category as luxury or non-essential imports to which regulatory duties typically apply. Officials believe lower import costs would help companies deploy network infrastructure faster and introduce advanced digital services more efficiently across Pakistan. Separately, the ministry recommended lowering taxes and duties on components used in local mobile phone manufacturing and assembly, a move it believes would make smartphones more affordable, support wider digital inclusion among lower-income consumers, strengthen local manufacturing capacity, and create employment opportunities across the handset assembly sector. With the federal budget due to be presented imminently, the proposals now await a decision that will determine how aggressively Pakistan chooses to use fiscal policy to support its digital infrastructure ambitions.
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