OICCI Wants Govt to Abolish Advance Tax on Telecom Subscribers in Upcoming Budget

The Overseas Investors Chamber of Commerce and Industry (OICCI) has recommended the government abolish the rate of advance tax on telecom subscribers completely as the majority of the subscriber base falls below the taxable limit and is hampering the affordability of mobile service. In its taxation proposals for budget 2024-25, the OICCI also recommended the government revamp the withholding tax regime as it will make the tax claims and its verification mechanism more transparent with minimum operational hassles. The chamber stated that advance tax on telecom services was reduced via Finance Act, 2021 from 12.5 percent to 10 percent for fiscal year 2021 and to eight percent for future years. However, through the Finance (supplementary) Act, 2021, the rate of withholding tax increased from 10 percent to 15 percent. Increased tax hampers the affordability of mobile service which is a critical service for the entire population and more than 70 percent population of Pakistan lives below the poverty line. Telecom service is also critical for the economic growth of a country. Additionally, Pakistan has the widest gender gap in mobile ownership (34 percent) and mobile internet use (43 percent) as compared to its regional peers. Sector-specific taxes increased the cost of mobile services which has a strong impact on the poorest consumers especially women, lessening their ability to become mobile broadband subscribers. Since more than 70 percent of the population lives below the poverty line and the percentage of return filers is also nominal so the implementation of withholding tax to the entire subscriber base is not logical. Further, the reduction in withholding tax will also promote the affordability of internet and data services to the low-income group of people. The Chamber recommended that the rate of advance tax on subscribers should be abolished completely as the majority of the subscriber’s base falls below the taxable limit or the withholding tax reduction made through Finance Act, 2021 should be reinstated i.e. eight percent effective fiscal year 2024. There will be no loss of revenue to the exchequer as the tax collection mechanism will be simplified in terms of real-time payment of advance tax under Section 147 on a quarterly basis. Furthermore, this measure will also make the tax claims and its verification mechanism more transparent with minimum operational hassles as maintaining the thousands of records, especially for advance tax on utility bills and imports is itself a very cumbersome procedure.