Cancelled for Now: Tax on SMS Messages?

Posted on June 22, 2009
Filed Under >Babar Bhatti, Economy & Development, Science and Technology
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Babar Bhatti

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 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?

16 responses to “Cancelled for Now: Tax on SMS Messages?”

  1. Babar says:

    Aqil – if people had work to do it will solve most of the problems. The taxes on imported phones has resulted in lowering the import bills and thats good. Unfortunately that also means more smuggling (per PTA reports) and it makes it difficult for poor people to buy phones.

    Another problem with taxes is that people don’t trust that the government is competent to spend it. How do you know if the taxes are not going to a corrupt official?

  2. Aqil says:

    Well I think Pakistanis are a bit too obsessed with mobile phones and excessive SMS messaging to the extent that its unhealthy. In a time of financial crunch, a few paissas of SMS tax won’t be such a bad idea.

    Also, our mobile phone import bill is crazy and needs to be substantially cut down. I think the cell phone market has saturated to the extent that most people who were going to get a connection have got it now. New mobile phones are mostly about getting more fancy sets with extra features that one doesn’t need and then showing it off to get an ego boost. This, along with the SMS craze, represents a serious ‘get a life’ problem. We need to find better things to do, activities that are really healthy. It can be playing some musical instrument, being good at cricket, football or some other sport, being a talented performer in theater, poetry, being well-read, or any other healthy activity. But for heavens sake, something other than getting a ‘high’ from showing off a stupid mobile phone. There is every reason for the govt to tax mobile phone sets when we are in a crisis and desparately need to reduce our imports

  3. Babar says:

    This way our government keeps us tied to twitter and blogs by creating this uncertainty. Taxed yesterday, gone today and back tomorrow. The people who run the backend systems of the mobile companies must be exasperated!

  4. Junaid says:

    It has NOT ben undone, it is still part of the budget. The Prime Minister is saying it WILL be undone. But lets wait to see what happens. I think they WILL tax these but maybe at smaller amount.

    Waisey bhi, PM ki koun sunta hai!

  5. adeel says:

    Creative change in the title to make the post still relevant. Nice work, admin.

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