Telecos start 11.5% WHT deduction on services -Pakistan Press Foundation (PPF)

Paksitan Press Foundtion

Telecos start 11.5% WHT deduction on services

By Muhammad Yasir

KARACHI: Telecom operators have started deduction of additional 1.5 percent tax on telephony services from March 16 after the amended Income Tax Ordinance 2011 was issued.

The withholding tax rate has been increased to 11.5 percent from 10 percent on postpaid cellular and landline services and on prepaid cellular and wireless telephony services on the recharge of load and bill payment.

Prepaid consumers are paying Rs 11.5 withholding taxes on the recharge of Rs 100 balance besides other taxes, whereas postpaid consumers will pay Rs 115 withholding tax on the payment of Rs 10,000 bill as per an estimate.

Telecom industry is one of the potential sectors as far as the government revenues are concerned, as it is fourth largest contributor of withholding tax in the country.

The industry has generated Rs 6.2 billion tax on the account of withholding tax in the first quarter of the current fiscal 2010-11. It stood at Rs 5.3 billion in the corresponding period of fiscal year 2009-10, showing 17.3 percent growth–which is 10 percent of the total revenue collected under the head of withholding taxes.

The tax rate of telephony services is already highest in the country and among the different countries of the region despite low-cost services offered by telecom operators by different networks.

Analysts of the telecom sector forecast adverse effects of additional tax on utility of telephony services and revenues of the telecom operators for the specified period of three months.

Consumers are already paying high taxes on telephony services including 19.5 percent GST/FED on each call, SMS, MMS and subscription of different packages.

Telecom operators, on the other hand, have absorbed the impact of high taxes through falling rates of their services in the highly competitive market. Hence, revenues of telecom companies were adversely affected as they were recorded in their financial results of past two years, they added.

The government has multiplied miseries of telecom operators who have been demanding the government ease off taxes for the sector. The discriminatory policy is not suitable for telecom sector because stakeholders have invested billions of dollars in the country in the past five years–who are being asked to pour more investment, analysts said.
Source: Daily Times
Date:3/18/2011