The Telecom Operators Association has presented a proposal to the Senate Standing Committee on Finance and Revenue seeking a substantial reduction in advance tax on telecom services from 15 percent to 8 percent, arguing the cut would ultimately increase, rather than reduce, government revenue, but the committee has declined to accept the claim without supporting documentation.
The committee, chaired by Saleem Mandviwalla and backed by the Finance Minister, has formally asked telecom operators to provide written proof substantiating their claim that lowering the advance tax rate would generate higher overall collections for the state. The demand for documented evidence reflects a now-familiar pattern in Pakistan’s budget negotiations, where industry associations frequently argue that lower headline tax rates encourage higher compliance, broader consumption, and ultimately greater aggregate revenue, while government bodies remain cautious about accepting such claims without quantifiable modelling or historical precedent to support them.
During the same session, the association outlined additional measures it says are necessary to ease the financial strain currently affecting the telecom sector. The operators proposed reducing the Withholding Tax rate from 6 percent back to 4 percent, noting that the earlier increase from 4 to 6 percent had significantly worsened cash flow conditions and raised the overall tax burden on operators. The association also requested an extension of the turnover tax carry-forward window from the current two years to five years, arguing that Pakistan’s persistently low average revenue per user results in an unusually slow payback period for telecom investments, meaning that a two-year carry-forward window unfairly penalises companies that are still in a loss-making phase of their investment cycle.
The Telecom Operators Association tied these tax relief requests to a broader policy argument centred on digitisation. By reducing the advance income tax on mobile usage, the association contends that mobile services would become more affordable for consumers, which would in turn accelerate mobile penetration across the country and support national digitisation goals. The association’s position is that this chain of effects, lower taxes leading to greater affordability, higher penetration, and faster digital adoption, would eventually produce a larger taxable base and higher overall government collections than the current, higher-tax regime generates. Whether the Senate committee will be persuaded by this argument remains to be seen, with the requirement for written substantiation signalling that lawmakers are seeking more rigorous economic justification before committing to any reduction in telecom tax rates within the upcoming budget.
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