Markets, Mobile, Taxation, Pakistan: The GSMA has long lobbied for the removal of taxes which it believes hinders mobile subscriber growth and thereby overall economic growth. The chance to meet Pakistan's President and PM to advocate the removal of the Activation Tax levied on new subscribers was too good a chance to turn down. The GSM was supported by a new report on Pakistan by Deloitte.

Talks to strengthen cooperation between the Pakistani Government and the country’s mobile industry were targeted on attracting the next 50 million mobile subscribers. The group which assembled to discuss this issue comprised on the one hand Pakistani President Pervez Musharraf, Prime Minister Shaukat Aziz, Minister of Telecommunications & IT Awais Leghari, and Pakistan Telecommunications Authority (PTA) Chairman Shahzada Malik. Leading the industry delegation was GSM Association (GSMA) CEO Rob Conway, who was supported by CEOs from Ufone (Mubashir Naqvi), Mobilink (Zouhair Khaliq), Paktel (Guo Yonghong), Telenor Pakistan (Tore Johnsen), and Warid (Hamid Farooq).

In this crucial meeting Rob Conway suggested that eliminating the US$8.24 Activation Tax paid by each new consumers would increase mobile penetration and lead to an increase in total tax revenues for the Pakistani Government. The elimination of the tax could significantly increase mobile usage and fuel economic growth, according to a study by consultancy Deloitte on behalf of the GSMA.

From his meetings with the President and Prime Minister, Mr Conway came away with a full appreciation of the Government’s strong commitment to continue to lower barriers to accessing mobile communications and progress the hugely successful programme of increasing telecommunications penetration. In this regard, Mr Conway was able to congratulate Pakistan’s entire political senior hierarchy in that they had helped Pakistan’s recent achievements in extending access to mobile communications.

In Mr Conway’s opinion: “By lowering barriers to connectivity, the mobile industry can connect the unconnected in Pakistan. The Activation Tax is a significant barrier for people looking to own a mobile phone and represents a constraint for operators seeking to expand into rural areas…With 50 million mobile users and 30% penetration, Pakistan is now a leader in mobile usage in south Asia. The next step is to build on that achievement by eliminating the Activation Tax and securing further economic and social benefits for the Pakistani people.”

The GSMA study written by Deloitte and due for imminent publication, estimates that the mobile industry has created 220,000 high-paying jobs in Pakistan and accounts for 5% of its Gross Domestic Product (GDP) and approximately 6% of the total taxes collected by the Central Board of Revenue. The study also found that Pakistan’s economy and society are benefiting from rising mobile phone usage and low tariffs, which lowers the cost of doing business and improves productivity, while helping families and friends to connect to each other at home and abroad.

Deloitte estimates that over a period of ten years the elimination of the Activation Tax will generate an additional US$2.17 billion in total tax revenues through the positive impact on the mobile industry and its spill over into the broader economy, over and above what the Government would obtain by maintaining the tax. The study also shows that tax collections from the mobile industry will grow consistently year-on-year in the period 2007-2017 due to increased penetration and higher revenues.

Last year, mobile operators invested US$2 billion in Pakistan, 54% of the total foreign direct investment in the country, according to the PTA. “It is very important that the Government of Pakistan sends a clear signal to the mobile industry and its investors that it will continue to help operators to connect the unconnected by eliminating the Activation Tax of US$8.24 in the next budget,” concluded Mr Conway.

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