LAHORE: The federal government has reportedly asked the Pakistan Telecommunication Authority (PTA) to work on awarding 3G license to cellular companies in order to generate Rs50 billion to Rs60 billion revenue during the financial year 2011-12.

The 3G represents a spectrum allowing higher speeds of data transmission.

Sources informed Dawn on Wednesday that the government had not yet finalised the budget proposals regarding levy of new taxes on the telecom sector but it was keen to generate revenue by other means like auctioning the 3G license.

The PTA is facing a dilemma as four of the five operators have been showing negative growth in terms of revenue for the last couple of years.

“Under the current circumstances, the operators will be reluctant to acquire 3G license,” an official of a leading operator said.

He said the authority last year had planned to raise non-tax income by inviting bids for 3G license but dropped the idea last minute.

There are over 100 million cell phone users in Pakistan according to PTA claims, while the industry estimates put the figure at 65 million.

The subscribers pay income tax through 10 per cent withholding tax on the cellular services they use. Besides, Rs250 is charged as activation tax but it is in lieu of custom duty on import of handsets.

“Owing to higher initial depreciation allowance on new capital investments in the income tax law, the operators end up showing losses to avoid income tax. The previously imposed turnover tax of 0.5 per cent on the operator’s revenues has been increased to 1 per cent recently,” the official said.

The operators often complain that taxes on the Pakistani telecom sector, in comparison with India, Bangladesh, Sri Lanka and Nepal, are the highest in region.

Every mobile phone user pays almost 36 per cent tax of his account in terms of wide range of taxes (Rs36 are deducted from a user’s account every time he or she consumes a balance of Rs100 – General Sales Taxes 19.5 per cent, withholding Tax 11.5 per cent and services charges 5 per cent).

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has submitted proposals to the government, asking it to impose new taxes on the telecom sector and generate over Rs100 billion. According to the chamber’s budget proposals 2011-12, huge sum of amount can be generated from the cellular subscribers.
Source: Dawn
Date:5/19/2011