ISLAMABAD ( MEDIA REPORT )
The Pakistan Muslim League-Nawaz (PML-N) government is faced with a major embarrassment as the incumbent telecom operators have shown no interest in participating in the fourth generation spectrum auction due to the unpredictable taxation on the telecom sector.
Industry sources said the telecom sector is over burdened with taxes by the government and they were operating under difficult conditions. Even the consultant hired by the telecom regulator PTA has reported that there was no appetite for new spectrum as operators were struggling with low margins, the sources added. Pakistan Today reported.
It is surprising that operators are showing no interest in having more spectrum even though it is vital source of their operations, an official source said, adding that such a situation occurs only when the operators have no confidence in the government. “It is a worrisome development for the government which proclaims itself as investor friendly.”
“Unpredictable taxation is the major cause of dwindling investment in the sector,” the source said, adding that their parent companies were reluctant to commit any investment for Pakistan till the taxation policy was transparent and predictable. The government has refused to lower taxes on the telecom sector, and Finance Minister Ishaq Dar has not given time to telco executives despite their repeated requests during the last six months, they said.
The PML-N government increased the advance income tax from 10 per cent to 15 per cent in one go, then it introduced taxes on handsets and their provincial government in Punjab started taxing mobile internet. For every Rs 100 recharge, the government collects Rs 40 in taxes, making it difficult for companies to operate, they added.
Investment in telecom sector has declined during the last two years. If the conditions remain the same then from the next year onwards mergers, acquisitions and large scale layoffs could be seen in the sector. The parent companies of local operators are reluctant to invest in the market without a clear taxation policy, sources said.
Nobody believes in the government, industry sources said, adding that they were assured a level playing field after the auction of 3G spectrum auction.
“However, they were served notices to pay 10 per cent advance income tax on their bids value, the custom duty on telecom imports was increased from 5 per cent to 25 per cent and taxes were imposed on handsets,” he said.
This shortsightedness increased government revenue earnings in the short term but it eroded investors’ trust.
“Our investors regarded PML-N government as investor friendly but now they regard it worse than PPP government which now appears far more investor friendly,” the sources concluded.
Courtesy….Pakistan Today