GSMA Urges Pakistan to Cut Telecom Taxes Ahead of Budget 2026-27

By Tanveer Ahmed & Shahzad Paracha :

The GSMA has formally urged the Government of Pakistan to introduce major telecom tax reforms in the upcoming federal budget, warning that excessive taxation on the sector is slowing investment, limiting digital growth, and widening the country’s digital divide.

In a policy submission addressed to Finance Minister Muhammad Aurangzeb, the global telecom industry body called for what it described as a “more balanced and predictable fiscal framework” under the Finance Bill 2026-27. The recommendations come at a critical time as Pakistan prepares for wider digital reforms following the recent 5G spectrum auction.

The GSMA’s intervention follows similar demands from Pakistan’s telecom operators, who recently proposed reductions in withholding tax, advance income tax, and import duties on telecom equipment and fibre infrastructure. The alignment between local telecom companies and the global industry body has intensified pressure on policymakers to revisit the country’s taxation structure for the telecom sector.

Concerns Over Heavy Telecom Taxation

The GSMA warned that Pakistan’s current tax regime is negatively affecting investment in digital infrastructure. According to the organisation, high upfront taxes and multiple sector-specific levies are reducing the amount of capital telecom companies can invest in expanding mobile networks, improving connectivity, and deploying new technologies.

The organisation noted that Pakistan’s telecom sector faces one of the highest consumer tax burdens in the region, with taxes on mobile services reaching nearly 34.5 percent. It argued that such taxes make mobile internet services unaffordable for millions of consumers, particularly low-income users.

The GSMA said that high taxes on prepaid mobile users directly increase the cost of connectivity. In many cases, a portion of the balance loaded by consumers is immediately deducted through advance income taxes, effectively raising the price of accessing digital services.

According to the industry body, reducing these taxes would encourage greater mobile internet adoption, increase digital inclusion, and help Pakistan expand its digital economy.

Three Key Reform Priorities

In its recommendations, the GSMA highlighted three major areas where immediate reforms are needed.

The first priority involves reducing upfront and distortionary taxes imposed on telecom operators. The organisation argued that high withholding taxes and advance income taxes directly impact network investment by limiting the financial resources available for infrastructure expansion.

Secondly, the GSMA stressed the importance of improving affordability for consumers. It maintained that lowering taxes on mobile services and devices would allow more Pakistanis to access digital platforms, online education, financial services, and e-commerce opportunities.

The third recommendation focused on simplifying Pakistan’s complex telecom tax structure. The GSMA noted that the sector currently faces overlapping federal and provincial taxes, regulatory charges, and sector-specific levies that create uncertainty for investors and increase compliance costs.

The organisation urged the government to simplify the taxation system to create a more stable and investment-friendly environment for the telecom industry.

Positive Response to Spectrum Reforms

While expressing concerns over taxation, the GSMA acknowledged recent policy improvements introduced by the government in relation to spectrum pricing and auctions.

The organisation welcomed reforms implemented during the March 2026 spectrum auction, including phased payment mechanisms and moratorium facilities that eased financial pressure on telecom operators.

According to the GSMA, these measures aligned with international best practices and reflected a positive shift in policy direction. However, it cautioned that spectrum reforms alone would not be sufficient unless broader tax rationalisation was also introduced.

The body warned that without wider fiscal reforms, the financial relief provided through spectrum policy changes could be offset by heavy taxation elsewhere in the sector.

IMF Constraints and Economic Pressures

The GSMA also acknowledged Pakistan’s broader economic challenges and its commitments under ongoing programmes with the International Monetary Fund.

The organisation recognised that fiscal reforms may have previously been constrained due to revenue targets agreed with the IMF. However, it argued that recent momentum in telecom sector reforms created an opportunity to revisit the taxation framework in a more supportive economic environment.

According to the GSMA, reducing taxes on the telecom sector should not be viewed solely as a revenue loss. Instead, it argued that improved affordability and increased investment could generate long-term economic benefits through higher digital adoption, greater economic activity, and expansion of the tax base.

The organisation referred to international evidence showing that countries with investment-friendly telecom policies generally experience faster digital growth, stronger network development, and improved economic performance.

Digital Economy and Investment Outlook

The GSMA said Pakistan risks falling behind regional competitors if the current tax structure continues to discourage investment and limit digital adoption.

It maintained that lower telecom taxes could create a “virtuous cycle” in which reduced costs encourage greater investment, improve network quality, expand internet access, and strengthen the broader economy.

Industry analysts believe the upcoming federal budget will be closely watched by both local and international investors, particularly after Pakistan’s efforts to accelerate digital transformation and prepare for wider 5G deployment.

The telecom sector remains one of the country’s most important digital infrastructure industries, supporting mobile banking, online education, e-commerce, and digital public services. Stakeholders argue that tax reforms could play a significant role in expanding internet penetration and improving connectivity across underserved areas.

With both domestic telecom operators and the GSMA publicly calling for reforms, pressure is mounting on the government to announce meaningful policy changes in the upcoming Finance Bill 2026-27.

About Author