Covid-19 pandemic has wreaked havoc across the board with mobile services, especially mobile broadband emerging as a lifesaving technology. However, given the economic climate, relief to the common man to utilize this essential service should be immediate.
Almost all indicators point towards this being a long, drawn-out battle against the spread of COVID-19, meaning we are, for now, living in the new normal. And this new normal has caused colossal damage to Pakistan’s already ailing economy; current account remains in deficit; foreign remittances are falling significantly; GDP is expected to fall by 1.6% during the current fiscal year as per the Economist Intelligence Unit.
Compounding these problems is the country’s depleted national exchequer, meaning funds to fight the virus spread are not readily available, hence the call for international support by Prime Minister Imran Khan.
In such times, it is expected that the Federal Board of Revenue will be given the problematic task to generate additional revenues in the next fiscal year. When almost all industries are facing a recession, and unemployment is expected to increase manifold, additional taxation becomes cumbersome. A possible outcome might be additional taxes on industries seemingly not heavily affected by Covid-19, which means the telecom sector might be put under a heavy burden.
One thing this pandemic has ascertained is that telecom services are essential, especially for the times ahead; from connecting families and communities to ensuring most businesses and educational institutes are kept online, the industry has made it possible to make it through this lockdown.
Mobile operators have also gone above and beyond their call of corporate social responsibility and shown a willingness to support the government and subscribers during these unprecedented times. Throughout this period these operators have responded with a sense of compassion, purpose and determination.
The four key telecom players are already under pressure to ensure business continuity without compromising on employee safety. This task becomes arduous given current network capacity is stretched to accommodate the 15% spike in internet usage since the lockdown. And with the lockdown impacting SIM sales and balance recharge, the operators’ revenue generation is also being affected by Covid-19.
Historically, the telecom sector has accounted for almost 1.1 percent of Pakistan’s GDP, and although numbers are not readily available, but the sector generated 1.7 percent of total tax revenues in 2017 by paying $638 million in taxes and fees excluding the withholding tax on mobile services.
Even presently, the telecom industry in Pakistan is already amongst the highest taxed in the world, as per the Sustainable Development Policy Institute. In foresight, the government should abolish advance withholding tax charged from all subscribers, and harmonize GST on voice, while abolishing it altogether on the usage of data services to promote internet usage and offer relief to the destitute.
A decision of this sort only seems fair at a time when unemployment is rampant and income deductions are becoming a norm; the average person requires some sort of relief on an essential service. It is pertinent to mention here that in 2015 the government collected Rs48 billion in withholding taxes from subscribers of telecom companies out of which only Rs4 billion was claimed by tax filers. And as per industry insiders, abolishing data tax will not only offer immediate benefits to the users, but in the long-term, this move will positively impact the digital ecosystem. This move will also support mobile operators’ desire to decrease the digital divide in pursuit of the government’s Digital Pakistan agenda.
More than 53% of mobile users cannot use mobile broadband, meaning they are being left behind in a world fast adopting digital solutions to tackle the ramifications brought upon by the pandemic. If mobile operators are to tackle this issue, relief needs to be provided, so a case can be made for network expansion in areas not yet covered by mobile broadband.
It is relevant to mention that countless studies indicate a directly proportional relationship between the digital divide and digital dividends; a 10% increase in mobile broadband penetration results in an increase of 0.15 percentage in the annual GDP growth rate.
All this points towards an urgent need, especially during this crisis, for the government to realize the short- and long-term benefits of a fairer taxation policy on the country’s masses and its digital ecosystem.
Whatever this new normal holds, it has reinforced the argument for recognizing mobile communication services, especially mobile broadband access, as an indispensable part of human life, and for this to be guaranteed, promoted and protected by the state.
This article was originally published at: https://epaper.brecorder.com/2020/06/16/13-page/840902-news.html
The opinions expressed in this article are the author's own and do not necessarily reflect the viewpoint or stance of SDPI.