In my earlier post, I wrote about the negative impact of GST on the PC sales in
. Pakistan government did not impose any additional tax on mobile phone but kept the previous 15% GST (General Sales Tax) on mobile phone service and Rs 500 activation charge on new connections unchabged. Pakistani government is expecting that it will get Rs 35 billion from the mobile phone industry by doing so. The government is expecting that Rs 25 billion GST will come from GST and the rest Rs 10 billion will come from the activation charge. This amount of revenue will come to the state coffer with the assumption that mobile phone connection will have a 150% growth in the coming fiscal year (1 July 2006- 30 June 2007).
A telecom expert, Brough Turner brought to my attention that government had greatly reduced tariffs on mobile phone in the last 5 years. What I feel is that should first try to achieve a teledensity of 40%-50% and then focus on collecting revenue. When a country has a huge market of any product, naturally, the government will be able to collect good revenue. I wish that other South Asian countries did the same.
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Razib, are you sure about this? From Pakistani friends, I understand the activation tax is currently Rs 500, down from Rs 5000 in 2001 and Rs 20,000 in 1996. See: http://blogs.nmss.com/communications/2005/12/mobile_phone_ad.html
Also I was under the impression the general sales tax (the Pakistani equivalent of a VAT) was currently 15% and that recent motions to reduce it to 12.5% had been tabled by the Senate. See: http://www.onlinenews.com.pk/details.php?id=98502
I agree the last thing Pakistan (or any developing economy) should do is raise taxes on telecom, as investment in telecom is more productive than investment in any other kind of infrastructure - roads, electricity, even education - as I document here: http://blogs.nmss.com/communications/2005/10/strong_positive.html
Thanks,
- rbt
Posted by: Brough Turner | June 12, 2006 5:54 PM | Permalink to Comment