ISLAMABAD: Rs40 billion annual withholding taxes imposed on the telecom consumers has brought the once lucrative sector on the verge of decline resulting in diversion of Foreign Direct Investment to other regional countries, said a press release issued on Friday.

While speaking on Thursday during the 60th meeting of Sustainable Development Policy Institute’s Study Group on “Information technology and Telecommunication”, Telenor Vice-President Aslam Hayat claimed that during the last 10 years, the telecom sector has given $8 billion revenue to the government in the form of direct and indirect taxes.

Telenor Vice-President of Aslam Hayat said that the sector has been treated differently when it comes to tax collection regime. He said that the instead of going to the IMF and asking for a tranche of $500 million, the government could have relied on the growth of this sector.

“According to the World Bank, in low and middle-income countries, such as Pakistan, every 10% increase in broadband penetration contributes 1.38 per cent to GDP growth.” Hayat said that the government has yet to fulfil its promises including provision of industrial status to the telecom sector, and reduction in withholding tax from 15 percent to 10 percent.

Earlier, SDPI Deputy Executive Director Dr Vaqar Ahmed said the growth in the telecom sector has stalled due to no significant foreign direct investment in this sector during the recent past.

Director-General Pakistan Telecom Authority Commercial Affairs Dr Muhammad Saleem said that the cellular sector in Pakistan falls among the most heavily taxed cellular sectors since the GST and WHT rates on telecom services are up to 19.5% and 14% respectively compared to average GST of 16% and WHT of 10% in other sectors.

The Pakistan Telecom Authority member Tariq Sultan urged that the government to Reduce GST may not impact the government revenues  in the long-run, and giving status of industry to this sector can further improve prospects. He maintained that the customs duty on the import of equipment should be brought back to the previous level.

In case of landline, except of initial Rs 1,000, there are no further taxes, but in case of mobiles, taxes are to be paid on recharge of every 100 rupees.

SDPI Executive Director Dr Abid Suleri said that bringing a balance between revenue and growth is the government consideration, which is under pressure after a massive reduction in the commodity prices.