Pakistan’s Chief Justice Mian Saqib Nisar has suspended a number of taxes and service charges related to prepaid mobile top-up cards.
The country’s Supreme Court described the tax deductions as “exorbitant”, with Nisar stating: “PKR38.08 ($0.33) is deducted on a prepaid mobile card of Rs100. This is illegal.” All taxes deducted on top-up cards will be suspended from 13th June.
Taxes on top-up cards in Pakistan account for as much as 42% of their total cost. Users are obliged to pay a federal excise duty as well as a withholding tax and a service fee. The Supreme Court is now pushing for a clear path towards deducting taxes on top-up cards, with Justice Ijazul Ahsan calling for a clear policy on levying tax.
Nisar was critical of the law relating to withholding taxes, calling it “imperfect” and noting that “withholding taxes cannot be levied on a labourer who earns Rs100 a day. How can we collect [taxes] from daily wage earners?” In May, the court invited input from operators and Pakistan’s attorney general to determine whether such taxes should indeed be legal.
Pakistan’s steep levies on mobile services are a longstanding bugbear for the country’s mobile operators. A 2015 World Bank report pegged Pakistan’s telecommunications taxes as among the highest in Asia, while its levies on corporate profits are some of the highest in the world.
The government of Pakistan reacted to this in May 2017with some tax cuts, although given the longstanding complaints from both operators and trade association the GSMA, the relief was slight. Federal excise duty was lowered to 17% from 18.5%, and the withholding tax for mobile was reduced from 14% to 12.5%.
The suspension as it stands may only be in effect for 15 days pending a more detailed implementation plan from Pakistan’s Federal Board of Revenue. Pakistan has around 150 million mobile connections according to the latest data from the Pakistan Telecommunication Authority.