Cellphone operators criticise tax on SMS favoring one company, seek withdrawal

[Naveed Yaseen]

By Jawwad Rizvi
LAHORE: Cellphone operators have decided to approach the finance ministry to seek withdrawal of 20 paisa tax per SMS, which they say will hamper growth of the industry.

The News learnt that cellular operators have started evolving a strategy and are preparing to make a presentation to the finance ministry. Before going to the ministry, top-notch officials of cellular operators will separately meet with each other in a couple of days to make their case strong.

Officers of one operator are also considering approaching the Competition Commission to look into the matter, as according to them the government has given extra support to one company at the cost of the whole industry.

The government in the budget for 2009-10, slapped a new 20 paisa tax per SMS in addition to the rate specified for the telecommunication sector. At present, all mobile phone companies except one are offering bulk SMS packages, which are seen as greatly favourable for consumers.

However, the new levy will reduce revenues of all operators and will also make charging rates complex, as currently most of them are offering unlimited SMS at a fixed rate.

According to data collected from the industry, out of 90 million registered cellular customers, over 45 million use the SMS service, each sending an average of seven SMS daily. Daily SMS traffic in the country is estimated at around 315 million and monthly traffic at around one billion.

The Pakistani market is very responsive to SMS-based packages. There has been tremendous growth in SMS usage, estimated at 30 per cent in recent years.

Interestingly, one company earned about $50 million from SMS service during 2008-09. But the government’s decision will affect the business of this company too.

However, cellular phone companies have appreciated the government’s announcement to reduce SIM activation tax to Rs250 from Rs500. But they are unhappy with the cut in federal excise duty/general sales tax, terming it insufficient. This tax was not reduced according to their demand to 16 per cent, the equivalent rate of GST for other sectors.

In this year’s budget, the federal government has reduced general sales tax to 19pc from 21pc. In last year’s budget, the telecom industry was the only industry which had been imposed with a 21pc GST.

http://www.thenews.com.pk/daily_detail.asp?id=183142