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GSMA highlights investment risks with Pakistan’s new mobile phone taxes

LAHORE: The Global System for Mobile Communications Association (GSMA) on Thursday expressed serious reservations about Pakistan’s new tax regime on mobile handsets as outlined in the latest budget.

Julian Gorman, GSMA’s head of Asia Pacific, warned that the imposition of sales taxes on mobile handsets priced under $500 and a 75% advance tax on telecom usage for individuals identified in the income tax general order could severely disrupt the market dynamics. These measures, he noted, might deter potential investors and adversely affect the country’s connectivity and digitalisation efforts.

During a press briefing, Gorman explained, “Heavy taxation has already been a barrier deterring investors from Pakistan’s market. As business costs rise and the returns on investment diminish, we see a corresponding decline in investor confidence.”

He further criticised Pakistan’s slow pace in embracing digital advancement compared to global trends, pointing out a significant gap in vision and strategic direction essential for realizing the Digital Pakistan initiative’s objectives. “Pakistan has considerable potential for digital growth, which could position it as a leader in the digital economy, especially with its robust, well-trained youth population,” he added.

However, Gorman highlighted deficiencies in government infrastructure and essential services that fail to match the country’s digital potential. “Adopting e-governance could significantly enhance governmental efficiency and increase public connectivity,” he suggested.

The upcoming third ‘GSMA Digital Nation Summit,’ scheduled for August in Islamabad, marks GSMA’s first international event in Pakistan. It aims to unite investors, innovators, and regulatory authorities from various countries to discuss digital transformation.

Gorman emphasised, “Pakistan could be a knowledge-based economy where innovation and technology not only drive economic growth but also improve governance.”

Yet, he expressed skepticism about the federal budget 2025’s impact on the IT and telecom sectors, particularly concerning the GSMA’s ‘Smartphone for All’ initiative.

He pointed out that while mobile phone penetration in Pakistan is at 40%, it should ideally exceed 70% to fully leverage the capabilities of fintech and other digital services, noting that less than 60% of the population uses smartphones.

Gorman remarked on the counterproductive competition among Pakistani authorities that tends to restrict digitalisation efforts rather than support them.

He emphasised that the total economic contribution of mobile phones to Pakistan’s economy exceeded $20 billion in 2023, but with an average revenue per user (ARPU) of less than $1, attracting new investors becomes increasingly challenging.

He also touched on the need for a balanced approach to security and digitalisation, referencing restrictions on platforms like X (formerly Twitter). “Clear strategies and policies are essential to maintain investor confidence and support content creators and users,” Gorman advised.

Lastly, considering Pakistan’s position as a leading global freelance market, he urged the government to nurture these skills, highlighting that digitalization is redefining traditional state boundaries in many areas.

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