Pakistan’s telecom industry has submitted a detailed set of fiscal and policy recommendations for the Federal Budget FY2026-27, aiming to improve sector sustainability, accelerate digital inclusion, and support the government’s broader digitization goals. The proposals have been shared through the Telecom Operators’ Association with the Ministry of Information Technology and Telecommunication (MoITT). They focus on reducing the cost of connectivity for consumers, enabling faster broadband expansion, and creating a more stable investment environment for telecom infrastructure and next generation technologies.
The industry highlighted that despite its central role in enabling Pakistan’s digital economy, the telecom sector continues to face financial pressure due to high taxation, rising operational costs, currency depreciation, and increasing capital expenditure requirements for infrastructure upgrades. In its recommendations, the sector proposed reducing withholding tax under Section 153 of the Income Tax Ordinance, 2001 from 6 percent to 4 percent and making it adjustable instead of minimum tax. It also suggested extending the carry forward period for turnover tax credits under Section 113 from two years to five years, stating that the current framework creates cash flow constraints and increases the cost of capital, limiting long term investment in network expansion.
Another key recommendation includes reducing advance income tax on telecom services under Section 236 from 15 percent to 8 percent. The industry argued that high upfront taxation on mobile usage disproportionately affects low income and prepaid consumers, slowing digital adoption and limiting access to essential services. The proposal further emphasized that reducing consumer taxation would help expand mobile internet usage and improve overall connectivity across both urban and rural regions. In addition, telecom operators have called for the abolition of customs duties on imports of 5G and fixed line telecom equipment, including network infrastructure, smartphones, servers, batteries, SIM cards, and other related components. According to the proposal, high import duties significantly increase deployment costs and delay the rollout of next generation connectivity, particularly in underserved and rural areas. The industry estimates that rationalizing these duties could unlock approximately Rs. 12 billion in additional capital for network expansion and digital infrastructure development.
The telecom sector has also recommended reducing duties and taxes on optic fiber cable imports from around 67 percent to 5 percent, stating that high fiber deployment costs remain a major bottleneck for broadband expansion in Pakistan. Furthermore, the industry proposed withdrawing the Commissioner’s authority under Section 147(6B) of the Income Tax Ordinance, 2001 to reject taxpayers’ advance tax estimates, arguing that the current mechanism increases disputes, litigation, compliance costs, and uncertainty for businesses operating in the sector. These recommendations have been placed within the broader context of Pakistan’s digital economy objectives and ongoing connectivity challenges, where infrastructure gaps continue to affect service delivery.
According to the submitted data, more than 30 percent of Pakistan’s population still remains outside 4G coverage, while approximately 12 percent of citizens do not have access to basic mobile signals. Fixed broadband penetration is reported to remain below 2 percent, and consumer taxation on telecom services stands at around 34.5 percent, which is among the highest in the region. The industry maintained that creating a more supportive investment environment for telecom operators would help accelerate digital inclusion, improve broadband access, expand financial digitization, and contribute to wider economic growth across the country through improved connectivity and infrastructure development.
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