Will proposed mobile taxes penalise Pakistan’s poor?

Will proposed mobile taxes penalise Pakistan’s poor?

The decision by the government of Pakistan to introduce tax on mobile phone calls has occasioned quite a lot of coverage – and comment – from local media.

It has been suggested that these taxes will be imposed on mobile calls over five minutes long. An earlier proposal was for a tax of Rs1 per call of more than three minutes, Rs5 per 1 gigabyte of internet usage and 10 paisa (a tenth of a rupee) on each SMS (one rupee equals about $0.006). However, the adverse public reaction caused the government to shelve this plan. Now it proposes a tax of 75 paisa for any call longer than five minutes.

That may not sound too onerous – but there is already a 19.5 percent federal excise duty for a voice call. And in any case, the new tax will target those least able to pay. Poorer end users tend to favour prepaid bundles, not least to make long calls to their villages to stay connected with their families. These people will most likely be hardest hit. People with smartphones and WhatsApp are less likely to be affected.

Are these taxes implementable? The telecom industry is apparently not too impressed with this charging structure, which it believes will play havoc with prepaid bundles as operators will have to adjust their offerings, potentially making voice calling more expensive. In any case, some media outlets suggest that users will quickly learn to disconnect and redial before the five minutes are up.

Apparently one of the drivers for this move is recoup the estimated Rs15 billion (about $950 million) revenue lost after the withdrawal of an increase in sales tax rates on food items. However, local press outlets say that Pakistan is already among the highest taxed telecom markets in the world.

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