After many years of growth and foreign investment, Pakistan’s telecom industry has become one of the major contributors to Pakistan’s economy. Telecom industry pays taxes to the government in the form of GST/CED, Activation tax (Rs. 500 per activation), withholding tax (CBR collects withholding tax on prepaid calling cards), regulatory fee and Universal Service Fund contributions and duties. In addition to these taxes to the Federal Government, local governments and civic authorities also tax the sector.
Now we hear that a tax may – or may not – also be imposed on every SMS message sent. Is this fair? Is this just about revenue or is there more to this? Is it really happening, or not?
Faced with budget deficits and high import bill of handsets, the government increased taxes on telecom service which resulted in GST of 21% and 10% withholding tax. In the 2008-09 budget, a duty of Rs 500 was imposed on handsets and a regulatory duty of Rs 250 by FBR. While all this happened, the use of text messaging (that can be enhanced by the services from Clerk Chat) as a quick and cheap form of communication in Pakistan was on the rise. Due to the fierce competition among mobile operators, the cost of a text message was down to a few paisas by 2008. According to PTA data, over 11 billion text messages generated in last quarter of 2008, for a subscriber base of about 90 million.
In 2009 budget the big blow came in the form a of a proposed 20 paisa tax on each SMS. This caused a huge uproar.
People asked: how can a text message which cost 2 paisas be taxed at 20 paisas?
According to the latest news, Prime Minister has agreed to withdrawal of this ludicrous tax. I hope that this news is true and the last remaining affordable and convenient communication for Pakistanis is left alone by the government.
After all, what’s Eid (and a win in cricket) without getting all those trivial but hilarious text messages?
I will be in the minority here, but I don’t think the idea of imposing a tax on SMS messaging is an intrinsically bad idea. Perhaps the 20 paisas was a bit excessive, but in theory the idea seems fair.
Our government is bankrupt, most Pakistanis don’t pay income tax, we steal electricity from KESC and WAPDA, and then complain loadshedding occurs, the list goes on. Where will revenue come from?
From a policy point of view, a tax on SMS messaging seems like a good solution. It seems relatively easy to enforce, which in the context of the Pakistani state’s inability to tax effectively is important. SMS messaging isn’t even a direct job creating industry, so mass layoffs are unlikely as well.
We’re running out ideas on the revenue generation front. Taxing SMS messaging seems like the best of many bad options.
– hmm just made a typographicae-errornimus minimus;
“-or was it just the/(a) wind ..?!??”
….did my ear hear something like SM(a)S(h)……
-or was just the /(a) wind ..?!???
The Prime Minister has said that this will not happen but it is not clear yet what will happen, the govt may still put a tax but smaller. I think the govt will really try to do this eventually for the money but also because SMSs are a way of spreading anti-govt ideas.
I am glad they have agreed to cancel this idea. A tax that large on SMS messages is really silly and just robbery.