31% Taxation on Cell Phone Calls
By Farid Masood • Aug 17th, 2008 • Category: Misc • 9 Comments •Government, in budget 2008~09, has increased sales tax on mobile calls from 15 % to 21%. Increase in sales tax on other general items was also increase from 15% to 16%.
In 2005, total revenue from cell phone sector was around US $ 4.0 billion. Cell phone industry has enormous growth rate in Pakistan so cell phone subscriber-ship has increased in last three years. So income from taxation on cell phone calls has also been increased due to that. After earning from petroleum products government have decided to earn from this sector also and increase sales tax by 7%. This sector has become second major source of income for government.
Average caller (Pre-paid) buys Rs 500 cards in one month, and we say it as there are 20 million average callers, then government incomes @21% tax becomes (500 x 21% = 147 x 2,000,000 = ) Rs 294,000,000 (Rs 294 Million) per month. We had not taken post-paid (including corporate) customers’ cell phone usage and an average of Rs 500 purchase is on pessimistic side of estimation.
10% advance tax is also applicable on phone calls, adding this to 21% sales tax total taxation becomes 31%. 10% advance tax can be claimed while paying tax but whole 3 billion customers are not tax-payers so this 10% amount goes in the reserves of government.
Easing the financial pressures from general public cannot be witnessed by implementing such policies. Who cares for masses with average income?
Last 5 posts by Farid Masood
- TPS in Islamabad Bloggers Meet-Up - January 3rd, 2009
- Who Will Reduce Edible Oil Prices - December 28th, 2008
- Selling of Nukes Production Facility - December 24th, 2008
- India Desperately Needs a War - December 21st, 2008
- Foreign Policies’ Impacts - December 19th, 2008
Trackback URL
|
|
|
Farid Masood
Email this author | All posts by Farid Masood
You can follow any responses to this entry through the RSS 2.0 feed.
Loading ...
If you are a tax payer, then you neednt worry as you can claim the tax back in your refund. I do think this is the best approach for a nation like Pakistan to be able to collect taxes from its non-tax paying citizens. An average or low income person doesnt use their cellphone very much, and thus wont be much affected. On the other hand if you are a heavy user, you must surely be making a ton of money, which probably is untaxed. How else do you propose funding development in the country? Please dont just complain, but try to provide solutions… unfortunately this has become the trademark of our nation. peace.
Dear farid,
It’s nice to read your article on Tax. Let me tell you why Government has increased Tax from 15% to 21%. As call rates are slashing down due to high competition and growth, call charges are shrinking constantly. This resulting in decline of Sales Tax and Advance/Withholding Tax. For ensuring that FBR won’t loose targeted money from Telecom sector, they have increased tax ratio. This is really unfair with public because on one hand..they increases Sales Tax % when they see that prices are slashing… why they not decreases tax when prices of other commodities are increasing. In recent months Inflation has reached more than 31% in Pakistan… it means 31% increase in Sales Tax and Withholding Tax… Right?
This FBR is doing work like In-House Sale. They don’t have to do any effort at all. They only prays that YA ALLAH, Please increase prices so we may reach our targets. It is practice given in last few years. Because if you analyse ratio of Direct and Indirect Taxes has been enormously effected in last one decade. For direct taxes, FBR has to do field work…where as for Indirect Taxes, they only have to pray for increase in prices of commodities.
As far you gave few imaginary figures of Prepaid cards usage. Right now, 38% revenue is coming from Post Paid Customers and 62% from Prepaid Customers. So don’t neglect PostPaid customers at all. They are part of big chunk of money for telcom sector and taxes. Secondly in 2005, In one telecom company average sale of Scratch Cards per day was more than 120 million. Now you can get idea that what will be sale of telecom Industry per day and how much is revenue collection.
Custom duty is also collected by FBR per connection. i.e. 500 Rs. per connection. Please add this in your analysis also.
Dear Shamsher, how many people claims Advance Taxes. Dear, if you have paid more Advance tax then your final tax figure.. FBR never refunds you backs. They only says that please claim rest of amount in next year. Same they do with Salaries tax. Government only knows to collect…not to refund to individuals.
One more thing happened in May: Pakistan Government - PTA has increased call charges for Incoming International call charges by 400%. Now it means FBR is making more revenue from Int’l incoming calls too.
In short, a population of 160 million is on average paying more than 27% tax but getting least benefit from Government side. Suppose, I’m earning 10,000 it means, I’m paying Rs2,700 as tax. Why we are unable to realise it because we are paying as indirect tax. In western world, our Pakistanis argues that govt. deducts 30% from their earnings… but I often replies that at least they are spending on you. Giving you many free services and caring you as their own citizen. What is happening in Pakistan? Who is caring? I still remember that one of my friend’s wife received letter from British consulate at the time of Kargil war that Ms. so and so, as you are own citizen… We are concerned about you and if you want to go back to UK and finding any difficulty then please contact us. We will arrange tickets and related for you. My friend was admiring that my wife lives maximum time in Pakistan but UK govt is concerned about her. It is called worth of Tax Payer.
shamsher
Your observation is right, but of we see it from a far distance, please consider the following:
a) if one is a tax payer he has nothing to worry, YES BUT MOST OF THE POPULATION USING CELL PHONES IS NO TAX PAYER.
b) being a tax payer any one can take refund of 10% advance tax and if one is heavy user then he can generate big amount in shape of tax return, it mean you are suggested to take money out of poor and putting it in rich people.
c) Please read my post Selling the Cash Cows for suggestion to earn money for government
Farid,
Please update that the total Taxes on Cell Phone usage is not 31%… It is 33.1%. Let me tell you how it comes 33.1%,
If Subscriber is using Rs.1000 (only call charges excluding taxes) per month then it means he is paying 21% GST ( previously it was 15%). So it becomes 1000 x 21% = Rs.210 GST. Total amount becomes Rs. 1210. On this amount, FBR charges 10% withholding tax i.e. 1,210 x 10% = Rs.121withholind tax and Total amount becomes 1,000 + 210 + 121 = Rs.1,331. That means 1000 is actaul usage and Rs331 are taxes. On in other way it is 33.1% taxes.
In India it is 12.24%, in Bangladesh 15%, in Sri Lanka 17.50% and in Nepal 23%. So We are on the Top.
“Pakistan comes First” with 33.1%
This is the slogan for public and its implication.
thanks Saleem
i want to change my number from U phone to Zong Number may kindly be provide me same number in zong as soon as possible if u can.for the above act of kindness I shall be thankful to you
My Number 0333-2100915
sir
I would like to inform you that i Naseem shaikh published Monthly General from Karachi througout the pakistan our beurue offices running in all leading cities of pakistan we delevered our General on honorary basis to the all VIPs incloding Beurucreates and members of National and provincial Assemblies through DCS courior and also delevered in all news stalls of Karachi honorarry.It is there fore requested that may kindly be issue your advertizment material for our magzine.this is such a better service of journalizm from your counter.I m waiting for your response.
Naseem shaikh
suit No 2 Jawed squire 13 B near Baitul mukaram Masjid Gulshan -e-Iqbal karachi
naseem shaikh editor monthly Intezam
TPS is doing it on its own end aslo.
Plz tell exactly what you need from us?