Mobile firms link $1bn investment to tax relief

[LahoreEstate]

Sunday, June 07, 2009
ISLAMABAD: Mobile phone operators have told Prime Minister Syed Yousuf Raza Gilani that they would invest $1 billion in the next fiscal year 2009-10 if the government waives activation charges, reduces sales tax to 16 per cent and delays licensing for 3G (third generation) services, it is learnt.

“If such facilitations are not provided, the mobile operators will not bring another $1 billion investment in the country,” said a high-level official of one of the mobile companies while talking to The News here on Saturday.

Chief executives of mobile companies held a meeting with Prime Minister Gilani a few days ago in which they discussed making more investments in the next fiscal year.

“But this investment depends on waiving the activation charge of Rs500, cutting sales tax from 21 per cent to 16 per cent and delaying licensing for 3G because the market situation is not ripe,” the official added.

“If mobile companies’ demands are not met in the next budget, then they will only invest in what is already in the pipelines to address their administrative problems,” he stated.

The existing law and order situation and higher inflation, he said, played havoc with the industry which had invested over $6.7 billion in Pakistan.

He noted that foreign direct investment (FDI) attracted by the sector stood at $629 million in April-June 2008, which declined to $364 million in the next quarter (July-Sept).

Import of handsets was worth $127 million in April-June 2008, which declined to $70 million during July-September. The imports nosedived to just $17.95 million in the October-December period, indicating that smuggling was on the rise.

Cellular companies are paying 31 per cent taxes as well as Rs750 on the import of mobile phone sets. There is 21 per cent GST and federal excise duty and 10 per cent withholding tax on pre-paid cards.

After increasing taxes by the government in the budget for 2008-09, he said that revenue collection declined by around 9 per cent as it was standing at Rs9.463 billion in first quarter (July-Sept) of the current fiscal year, which decreased to Rs8.858 billion in the second quarter (Oct-Dec) of 2008-09.

The growth of the sector also witnessed a decline as it registered negative growth by 0.3 per cent in the October-December period during the current fiscal year 2008-09.

According to the PTA report, he said that it was the projection of the regulator that higher taxation resulted in revenue collection.

According to PTA projection, revenue collection could be materialised at Rs45.496 billion with the imposition of 15 per cent tax, which was projected to decline to Rs41 billion with increased GST rates of 21 per cent. —MH

http://www.thenews.com.pk/daily_detail.asp?id=181607