Pakistan telecom sector faces investment pressure amid high tax burden
New Delhi, May 20
Pakistan's telecom sector is facing investment pressure amid a high tax burden that is impacting its capacity to expand and upgrade digital infrastructure, a report has said.
A report published in Business Recorder highlighted that the federal budget approaches and questions are being raised over whether current taxation policy is aligned with Pakistan's ambition to build a competitive and inclusive digital economy.
The telecom sector, which underpins financial inclusion, e-commerce, digital governance and IT exports, has contributed more than PKR 2.5 trillion in taxes and levies over the past decade, it said.
According to Pakistan Telecommunication Authority (PTA) data, operators contribute between 35 per cent and over 40 per cent of revenues annually through taxes, levies and regulatory payments.
When broader value chain contributions are included, an analysis of a major operator over 2019-2025 suggests nearly half of total revenues are ultimately transferred to the state on a fully loaded basis.
Moreover, the sector faces continuous investment demands for network expansion and upgrades, creating strain between fiscal contributions and capital expenditure needs, the report said.
In addition, mobile users in Pakistan face a combined tax burden of around 33-35 per cent on prepaid services, placing telecom among the most heavily taxed consumer sectors, it added.
Average revenue per user remains close to $1, among the lowest globally.
The report showed that this is affecting affordability and access, particularly for low-income users, many of whom continue to pay advance withholding taxes on mobile usage.
However, Pakistan's usage gap also remains wide, with around 81 per cent mobile broadband coverage but nearly 40 per cent of users not actively using mobile internet.
Additionally, the sector is entering a capital-intensive phase, with recent spectrum auctions requiring over $500 million in commitments, alongside planned investments in 5G rollout and annual reinvestment of 15-20 per cent of revenues.
— IANS
Reader Comments
It's sad to see a neighboring country struggling like this. The fact that 40% of users have coverage but aren't using mobile internet shows the affordability crisis. In India, we have issues too, but Jio's low prices and government push for digital payments helped bridge the gap. Pakistan's tax structure seems punitive. Hope they find a balance between revenue generation and growth. 😔
As an Indian who works in telecom policy, I can tell you that infrastructure upgrades are impossible without investment-friendly policies. Pakistan's government seems to view telecom as a cash cow rather than an enabler of economic growth. They've collected PKR 2.5 trillion in taxes over a decade — that's enormous for a sector with such low ARPU. Something has to give, or 5G will remain a pipe dream for them.
I understand the need for tax revenue, but killing the golden goose is never wise. Pakistan's telecom sector is essentially funding government coffers while starving itself of capital for expansion. The 81% coverage but 40% non-usage gap is telling — people can't afford to use what's available. India faced similar challenges, but our regulatory framework was more balanced. Pakistan should consider tax holidays for rural expansion, like we did.
While I don't always agree with Pakistan's policies, I feel for their telecom industry here. A 33-35% tax on prepaid services is insane! Imagine paying that much extra just to make a call in India — we'd revolt. But seriously, this affects the poorest the most. With 5G coming and spectrum costs already at $500M, operators are stuck between a rock and a hard place. Hope they cut taxes and unlock growth. 🇮🇳🤝
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