Mobile Phone Taxes Can Derail Digital Growth and Investor Confidence, GSMA Warns

The Global System for Mobile Communications Association (GSMA) has expressed serious concerns regarding the recent tax proposals in Pakistan’s budget 2024-25. These proposals include imposing sales mobile phone taxes on smartphones priced below $500 and a 75% advance tax on telecom usage for people listed in the Income Tax General Order. According to Julian Gorman, GSMA Head of Asia-Pacific, these measures will sabotage investor confidence, increase the cost of doing business, and negatively impact Pakistan’s digitalization efforts.

He further underscored that such heavy taxation is a barrier for investors. Moreover, it will lead to higher operational costs and lower returns on investment. As a result, it will deter potential investments, impeding the growth of essential connectivity and digital initiatives in Pakistan. He highlighted that while the rest of the world is progressing in digitalization, there is a risk that Pakistan will lag due to a lack of clear vision and direction towards achieving its Digital Pakistan goals.

Mobile Phone Taxes To Hit Investors’ Trust

Underscoring Pakistan’s potential for digital growth, Gorman stated that the country’s large, well-trained youth population is a significant asset. However, he also underlined that the government and basic services need to harness this potential effectively through better digital infrastructure and e-governance. According to him, enhanced e-governance will not only improve governmental performance but also increase connectivity among citizens.

In August, Pakistan will host the third “GSMA Digital Nation Summit” in Islamabad. It will be a significant international event to bring together investors, innovators, and regulatory authorities from different countries. This summit underscores Pakistan’s potential to transform into a knowledge-based economy driven by innovation and technology. However, achieving this demands the enactment of regulatory measures that support digital growth.

Gorman also emphasized the low mobile phone penetration in Pakistan, which stands at 40%. It is extremely lower than the target of over 70%. By addressing the high taxation issues and focusing on strategic digitalization efforts, Pakistan can remarkably improve its digital economy and attract greater foreign investment. There’s an urgent need for Pakistan to reconsider its taxation policies on mobile smartphones and telecom usage to encourage a more investor-friendly environment and rev its digital transformation.