The Senate Standing Committee on Finance and Revenue has asked the Telecom Operators’ Association (TOA) to submit written justification for its claim that reducing taxes on telecom services would ultimately increase government revenue through higher usage, greater digital adoption, and expanded tax collection.

The committee, chaired by Senator Saleem Mandviwalla, reviewed a series of proposals presented by the telecom industry during discussions on the Finance Bill 2026. The proposals focus on reducing the tax burden on both telecom operators and mobile consumers to improve affordability and support the growth of Pakistan’s digital economy.

The TOA proposed lowering the withholding tax on telecom operators from 6% to 4% and extending the carry-forward period for turnover tax credits from two years to five years. Industry representatives argued that the increase in withholding tax has created significant cash flow pressures, particularly for operators facing long investment recovery periods and relatively low average revenue per user.

The association also called for a reduction in the advance income tax charged on mobile services, maintaining that lower taxes would make connectivity more affordable, expand mobile penetration, accelerate digitisation, and ultimately broaden the tax base.

Committee members, supported by Finance Minister Muhammad Aurangzeb, requested detailed evidence to support the industry's argument that lower tax rates would lead to higher overall revenue collection for the government.

During the meeting, the telecom industry acknowledged the government's efforts to maintain macroeconomic stability and welcomed several budget measures aimed at supporting investment and digital growth. These include proposed reductions in customs duties on raw materials used in local handset manufacturing and the government's plans to gradually rationalise the super tax.

However, industry representatives noted that the long-standing issue of high taxation on mobile users remains unresolved. Currently, mobile consumers are subject to a 19.5% General Sales Tax (GST) and a 15% advance withholding tax on telecom services.

According to TOA, the majority of Pakistan's approximately 206 million mobile subscribers are not active taxpayers and therefore cannot claim refunds against the advance withholding tax deducted from their mobile usage, effectively increasing the cost of connectivity.

The association also urged the government to consider additional reforms aimed at promoting broadband expansion and long-term investment in digital infrastructure. These include rationalising duties on optical fiber equipment, reducing administrative hurdles, and improving tax certainty for investors.

Industry stakeholders emphasized that telecommunications play a critical role in enabling digital transformation across the economy by supporting financial inclusion, e-commerce, education, healthcare, agriculture, and public services.

The committee is expected to review the telecom industry's written submissions before making further recommendations on the proposed tax measures as part of the ongoing deliberations on the Finance Bill 2026.