LAHORE: The Punjab government has decided to impose 19. 5 percent tax on Internet services over 2 Mbps and for Internet bills exceeding Rs. 1,500 per month.
After announcement of the Punjab budget, around 56 percent of the population of Pakistan will be liable to pay service taxes on internet usage for 3G, 4G, broadband, EVO or any Internet communication with speeds exceeding 2 Mbps or/and if the monthly bill for their service exceeds Rs 1,500 per month.
The PRA officials clarified that tax will be applied on Internet broadband services which are above 2 Mbps or having a bill of Rs 1,500, but it will continue to give exemption to educational institutes and on students’ packages.
Policymakers believe that collection of taxes through mobile and IT sectors is easier, as this sector is highly documented.
According to telecom industry experts, out of 134 million overall users’ base, there are mere 13 million mobile phone users who started using 3G/4G and LTE technologies last year. The new tax will cease the growth of users of mobile phone companies, which will result in the decline of revenues of the telecom operators, hence the government will be unable to collect its relatively higher potential revenue.
The decision will also adversely affect the future investment plans of the cellular phone companies because of the betrayal of their confidence by the government, which every year assures them of reducing the tax burden on this sector and on their customers, but it takes outright opposite measures to enhance tax burden on the overburdened sector.
As a result of taxes on Internet services, cellular phone companies may stop rolling out of infrastructure into untapped areas of different cities in the future, which will limit the 3G/4G service to specific pockets of few cities.
A study by GSMA stated that 10 percent increase in broadband usage will increase GDP growth by 1. 38 percent, while 10 percent increase in usage from 2G to 3G services will increase GDP by 0.15 percent.
