Pakistan’s telecom industry has proposed a series of fiscal and policy measures for the federal budget 2026-27, calling for tax reductions and regulatory changes to support digital expansion, improve affordability and encourage investment in telecom infrastructure.
The recommendations were submitted as part of proposals aimed at improving the sector’s financial sustainability and supporting the government’s digitisation plans.
According to the industry, telecom operators continue to face pressure due to high taxation, rising operational costs, currency depreciation and growing infrastructure investment requirements. It also noted that Pakistan remains behind regional countries in mobile broadband penetration and affordability.
Among the key proposals, telecom operators have urged the government to reduce withholding tax under Section 153 of the Income Tax Ordinance, 2001 from six percent to four percent and make it adjustable instead of treating it as a minimum tax.
The industry has also proposed extending the carry-forward period for turnover tax credits under Section 113 from two years to five years.
According to the proposal, the current taxation structure creates cash flow constraints and increases the cost of capital, limiting long-term investment and network expansion.
Operators argued that rationalising these taxes would improve investment capacity, speed up broadband deployment and support expansion in underserved areas.
The telecom industry has further recommended reducing advance income tax on telecom services under Section 236 from 15 percent to eight percent.
It maintained that high upfront taxation on mobile usage disproportionately affects low-income and prepaid users, limiting digital adoption and access to online services.
The proposal noted that the tax rate had earlier been reduced under a decision by the Economic Coordination Committee (ECC) before being increased again through the Supplementary Finance Act 2021.
According to telecom operators, lowering consumer taxation would improve affordability, increase usage and support financial and digital inclusion.
The industry has also called for the abolition of customs duties on the import of 5G and fixed-line telecom equipment, including smartphones, servers, batteries, SIM cards and network infrastructure.
It stated that high import duties continue to raise deployment costs and slow the rollout of next-generation technologies, particularly in rural and underserved regions.
Operators estimated that reducing these duties could unlock around Rs12 billion in additional capital investment for network expansion and digital infrastructure.
The proposals also include reducing duties and taxes on optic fibre cable imports from nearly 67 percent to 5 percent.
According to the industry, high fibre deployment costs, global supply shortages and increased freight charges have become major hurdles for broadband expansion in Pakistan.
Telecom operators argued that lowering fibre-related duties would accelerate fibre rollout, improve broadband quality and support fixed broadband penetration, which remains below 2 percent in Pakistan.
The industry further recommended revoking the commissioner’s authority under Section 147(6B) of the Income Tax Ordinance, 2001 to reject taxpayers’ advance tax estimates.
According to the proposal, the current mechanism increases disputes, litigation, compliance costs and uncertainty for businesses.
The telecom sector maintained that removing these powers would improve ease of doing business and reduce the administrative burden on companies and tax authorities.
The industry linked the recommendations to Pakistan’s broader digital economy goals and ongoing connectivity challenges.
It noted that more than 30 percent of the population still lacks 4G coverage, while nearly 12 percent remains without access to basic mobile signals.
The telecom industry also pointed out that Pakistan has one of the region’s lowest average revenue per user (ARPU) rates, while consumer taxation on telecom services stands at 34.5 percent, among the highest in the region.
According to the industry, creating a more sustainable investment environment for telecom operators would help expand broadband access, improve digital inclusion and support wider economic growth.
It also cited studies suggesting that a 10 percent increase in broadband penetration can raise GDP per capita by nearly two percent.
