Telcos reject duty on calls exceeding five-minute duration

ISLAMABAD: All the four mobile phone companies and PTCL have warned the government that the proposed Rs0.75 federal excise duty on calls after five minutes is technically difficult to implement and may damage the service model of the telecom sector.

The PTCL and four cellular mobile operators — Jazz, Telenor, Ufone and Zong4G — have in a letter to Finance Minister Shaukat Tarin and IT Minister Syed Aminul Haq expressed concern over the new proposal in the Finance Bill 2021 to levy FED at the rate of Rs0.75 after a call of five minutes.

The telcos have said the new measure would shake the confidence of investors in the telecom industry of Pakistan that had been one of the largest recipients of foreign direct investment.

The letter said: “If forced upon the industry, [levy] shall cause major disruption and damage to the service model structure of the telecom sector.

“This levy would be unimplementable and would result in withdrawal of free minutes and bundles which are used by majority of our customers.”

Warn the proposal may damage service model structure

The letter said more than 90 per cent of voice minutes were consumed through bundles, and if this facility was consequently withdrawn and normal rates were charged to customers, their call rates would go up by multiple times.

The letter has referred to the clarification by the finance minister regarding his own budget speech that no new taxes would be levied on the telecom sector, but in his June 25 Senate speech Mr Tarin announced a levy of Rs0.75 for each voice call exceeding five-minute duration.

Highest rates of taxation

The telcos have said that the voice usage by telecom consumers has one of the highest rates of taxation in the world and the new FED would eventually hit the Digital Pakistan initiative of the government.

“If this proposal is forced to be implemented, this regressive measure will have technical and commercial consequences as well as legal implications,” the letter said, adding that billing under new measure was technically impossible.

The letter said that the new FED would lead to fundamental changes in the consumption behaviour of the subscribers and lead to shrinking of industry revenues and eventually eroding of the taxation revenues.

It added that even auditing of the new federal excise duty highly was complicated as each call record would require analysis and auditing.

“This means that the FBR will need to sniff through billions of call minutes and records to audit the new FED only,” the letter said.