GSMA Warns Pakistan’s New Taxes on Mobile Phones Could Deter Investors
Staff Report
The Global System for Mobile Communications Association (GSMA) has raised concerns over the imposition of taxes on mobile handsets in the budget, terming it a move that will shake the confidence of investors interested in entering the Pakistani market.Govt Imposes Uniform Tax on Mobile Phones in Budget 2024
The budget proposals regarding the imposition of sales tax on mobile handsets below $500 and the imposition of 75% advance tax on telecom usage for persons mentioned in the income tax general order will adversely impact the provision of essential connectivity, digitalization initiatives, and internet usage in the country.
“Heavy taxation has discouraged investors from entering Pakistan’s market. As the cost of doing business continues to increase and return on investments lowers, investor confidence decreases,” Julian Gorman, head of Asia Pacific, GSMA, said while talking to the media here on Thursday.
He said that Pakistan was going “flat” while the rest of the world was moving up in digitalization.
“The big thing missing in Pakistan is ‘vision,'” he said, adding that Pakistan lacks vision and direction towards digitalization to achieve the targets of the Digital Pakistan initiative.
He said that Pakistan has significant potential for digital growth and to become a leader in the digital economy due to its large, well-trained youth population.
“However, the government apparatus, as well as essential services, are not up to the digital potential available in the country. The adoption of e-governance will increase the performance of the government apart from making people more connected,” Mr. Gorman said.
He was speaking to the media to highlight the importance of holding the third ‘GSMA Digital Nation Summit’ in Islamabad in August.
This is the first such international event being held by the GSMA in Pakistan, and it will bring different stakeholders, including investors, innovators, and regulatory authorities from different countries, under one roof.
“Pakistan has the potential to become a knowledge-based economy where innovation and technology drive economic growth and enhance governance,” he said, but added that there was a need for the implementation of all the regulatory actions taken in this regard.
He added that the Digital Nation Summit conveys how societies need to go digital, but at the same time, the GSMA head for the region also expressed skepticism over the impact of the federal budget 2025 on the IT and telecom sector. He said that the increasing taxation on phone sets will damage the “Smartphone for All” initiative of the GSMA.
He added that mobile phone penetration in Pakistan stands at 40 percent, but it should be more than 70 percent in a country with a large youth population. Out of this, smartphone users are less than 60 percent, which restricts the widespread usage of fintech and other essential services available digitally.
Mr. Gorman added, “It has been observed that in Pakistan various authorities compete to restrict digitalization, instead of complementing each other.”
He said that it has been estimated that the total economic impact of mobile phones on Pakistan’s economy has reached more than $20 billion in 2023, but the Average Revenue Per User (ARPU) was less than $1, which will discourage new investors from entering the Pakistani market.
“Besides, heavy taxation has discouraged investors as well as innovators from entering Pakistan’s market,” Mr. Gorman said.
He also suggested that Pakistan needs to have a balance between security and digitalization. Referring to restrictions on X (formerly Twitter), the head of GSMA Asia Pacific region added that Pakistan should have a clear strategy and policies in this regard to maintain the confidence of investors, users, and content creators.
He said that since Pakistan was one of the leading freelance markets globally, the government needs to nurture their skills as digitalization has led to a new era that had never existed before. The physical boundaries of the state are being redefined by digital boundaries in many spheres.
