The government of Pakistan is introducing tax breaks for the mobile sector, lowering tariffs and duty on both devices and services.
The move will come as a welcome relief to firms and consumers, as taxes in Pakistan’s mobile sector have typically been high. The breaks will see the withholding tax on mobile services drop from 14% to 12.5%, while federal excise duty will fall from 18.5% to 17%. With the federal government reducing the sales tax on mobile services, provincial governments are expected to follow suit.
Mid-range smartphones meanwhile will see custom duties slashed from PKR1,000 ($9.45) to PKR650. However, feature phones will see their duty rise to PKR650 from PKR300 with the convergence of the low-end and mid-range handset categories. High-end smartphones will retain their PKR1,500 duty.
In addition, the government is scrapping the withholding tax on transactions made via mobile payments services as a means of promoting the country’s fledgling digital payments sector.
Pakistan’s mobile operators – as well as the GSMA – have for years argued that by imposing high taxes on the country’s mobile sector, the government has stymied the development of transformative telecoms services. Over the past three years, the country’s government has raised mobile services taxes several times, and the World Bank has reported that Pakistan’s telecoms taxes are among the highest in the region, as well as the third highest in the world in terms of corporate profits.
