ISLAMABAD: The Special Investment Facilitation Council (SIFC) is currently mediating a tax dispute between provincial governments and Long Distance and International (LDI) telecom companies.
LDI operators are contesting provincial levies, citing concerns over taxation regulations that they believe exceed the provinces’ constitutional jurisdiction regarding incoming international voice services, according to sources from the Ministry of IT and Telecommunication.
The parties involved have struggled to reach an agreement for an extended period. Consequently, the Ministry of IT decided to escalate the issue to the SIFC, hoping for mediation to achieve a settlement. Although most LDI operators’ licenses expired in July or August 2024, they are still permitted to provide international telecom services for inbound and outbound traffic.
Complicating matters, these operators also have outstanding balances owed to the Universal Service Fund (USF), alongside the ongoing tax dispute. Nonetheless, both the provincial governments and the Ministry of IT maintain that the taxes comply with global standards.
During discussions at the SIFC, the Ministry of IT proposed that an independent organization be tasked with conducting due diligence and identifying a viable solution in collaboration with the Federal Board of Revenue (FBR), LDI operators, and the provinces.
The Ministry also recommended that the Attorney General of Pakistan (AGP) and the Law Division consider both local and international legislation to clarify the legal and regulatory aspects of the tax dispute, emphasizing the need for precise legal interpretation.
Additionally, the Ministry updated the SIFC on the National Cloud Procurement Framework, which has been approved by the governments of Khyber-Pakhtunkhwa (K-P), Gilgit-Baltistan (G-B), and Azad Jammu and Kashmir (AJK). AJK was instructed to provide a milestone-based timeline for developing its IT policy, including the adoption of the Cloud Policy, though both AJK and G-B have yet to do so. G-B must also inform the federal government of its progress and expedite its draft policy adoption.
Each province, including AJK and G-B, is required to take necessary actions to implement the Cloud Procurement Framework, which was formally notified on May 14, 2024. The federal government will be consulted regarding a timeline-based and milestone-based plan for its adoption.
Pakistan’s telecom sector faces numerous challenges. The sector has been further strained by taxes on smartphones imposed by the previous Pakistan Muslim League-Nawaz administration. The recent sale of Telenor to PTCL has also highlighted ongoing issues in the industry.
Government regulations, such as linking license renewal costs to the dollar’s value, have not benefitted the telecommunications industry. With the exception of Ufone, most telecom providers have refrained from participating in previous spectrum auctions, partly due to this strategy. The industry remains heavily burdened by taxation, complicating efforts to address other critical issues.
