Pakistan’s telecom industry has proposed a wide-ranging set of fiscal and policy measures for the Federal Budget FY2026-27, calling for lower taxes, reduced import duties, and regulatory changes to support network expansion, digital inclusion, and long-term sector sustainability.
The recommendations were submitted by the Telecom Operators’ Association to the Ministry of Information Technology and Telecommunication, with the industry arguing that the sector is under growing financial pressure despite its central role in enabling the country’s digital economy.
According to the proposals, telecom operators are facing rising operational costs, currency depreciation, heavy taxation, and increasing capital requirements for infrastructure and next-generation technologies. The industry said these pressures are affecting cash flows, raising the cost of capital, and limiting investment in network expansion.
Among the key recommendations, the sector has urged the government to reduce withholding tax under Section 153 of the Income Tax Ordinance, 2001 from 6 percent to 4 percent, and to make it adjustable instead of treating it as a minimum tax. It also proposed extending the carry-forward period for turnover tax credits under Section 113 from two years to five years.
The industry has also called for a cut in advance income tax on telecom services under Section 236 from 15 percent to 8 percent, arguing that high upfront taxes on mobile usage disproportionately affect low-income and prepaid users. It said the existing tax structure is discouraging digital adoption and limiting access to essential services.
In addition, telecom operators have sought the abolition of customs duties on the import of 5G and fixed-line telecom equipment, including network infrastructure, smartphones, servers, batteries, SIM cards, and other related components. They said high import duties are increasing deployment costs and slowing the rollout of next-generation connectivity, especially in rural and underserved areas.
According to industry estimates, rationalizing these duties could unlock around Rs. 12 billion in additional capital deployment for network expansion and digital infrastructure.
The sector has separately recommended reducing total duties and taxes on optic fiber cable imports from about 67 percent to 5 percent. It said the high cost of fiber deployment has become a major obstacle to broadband expansion across the country.
Another proposal calls for the withdrawal of the Commissioner’s authority under Section 147(6B) of the Income Tax Ordinance, 2001 to reject taxpayers’ advance tax estimates. The industry argued that the current mechanism leads to greater uncertainty, higher compliance costs, more disputes, and increased litigation for businesses.
The recommendations come as Pakistan continues to face major connectivity gaps. According to the industry, more than 30 percent of the population remains outside 4G coverage, while around 12 percent still lacks access to even basic mobile services. Fixed broadband penetration remains below 2 percent, and consumer taxation on telecom services is estimated at 34.5 percent, one of the highest levels in the region.
The telecom industry said that creating a more supportive fiscal and investment environment would help accelerate broadband penetration, digital inclusion, financial digitization, and overall economic growth in Pakistan.
