Pakistan’s telecom industry has submitted a wide range of fiscal and policy recommendations for the Federal Budget FY2026 27 to improve sector sustainability, expand digital connectivity, and support the country’s broader digital transformation goals.
The proposals were submitted through the Telecom Operators’ Association to the Ministry of Information Technology and Telecommunication. The industry urged the government to reduce taxes, rationalise import duties, and create a more investment friendly environment for telecom infrastructure and next generation technologies.
The telecom sector stated that it continues to face serious financial pressure despite playing a central role in Pakistan’s digital economy. Operators pointed to rising operational expenses, currency depreciation, high taxation, and increasing infrastructure investment needs as major challenges affecting long term growth.
Telecom Operators Seek Reduction in Withholding Tax
One of the key recommendations focuses on reducing withholding tax under Section 153 of the Income Tax Ordinance 2001 from 6 percent to 4 percent.
The industry also proposed making the withholding tax adjustable instead of treating it as a minimum tax. Telecom operators argued that the current taxation structure creates severe cash flow constraints and raises the cost of capital for companies operating in the sector.
According to the proposal, these financial pressures limit the ability of telecom companies to invest in network expansion, infrastructure upgrades, and digital services.
The industry maintained that easing the tax burden would improve liquidity and encourage operators to increase investment in underserved areas.
Proposal to Cut Advance Income Tax on Mobile Services
The telecom sector also requested a reduction in advance income tax on telecom services under Section 236 from 15 percent to 8 percent.
Industry representatives argued that high taxes on mobile usage disproportionately affect low income and prepaid consumers across Pakistan. They said the heavy upfront taxation discourages digital adoption and limits access to essential online services.
Telecom operators believe lower taxes would help increase mobile internet usage, improve digital inclusion, and support the government’s efforts to promote financial digitization and e governance initiatives.
Pakistan currently has one of the highest telecom taxation rates in the region. According to the industry proposal, total consumer taxation on telecom services stands at approximately 34.5 percent.
Industry Calls for 5G Equipment Duty Exemptions
The telecom industry further proposed abolishing customs duties on the import of 5G and fixed line telecom equipment.
The recommendation covers a wide range of products, including network infrastructure equipment, smartphones, servers, batteries, SIM cards, and other telecom related components.
Operators stated that high import duties significantly increase deployment costs and slow the rollout of advanced connectivity technologies across the country.
The industry particularly highlighted the challenges faced in expanding services to rural and underserved areas where infrastructure investment already remains expensive.
According to telecom operators, rationalising duties could unlock nearly Rs12 billion in additional capital deployment for network expansion and digital infrastructure development.
The sector believes that easing import restrictions would accelerate Pakistan’s transition toward next generation technologies and improve the country’s digital competitiveness.
Fiber Broadband Expansion Faces Challenges
Another major recommendation focuses on reducing overall duties and taxes on optic fiber cable imports from nearly 67 percent to 5 percent.
The telecom industry argued that expensive fiber deployment has become a major bottleneck for broadband expansion in Pakistan.
Fixed broadband penetration in the country remains below 2 percent, highlighting the urgent need for investment in high speed internet infrastructure.
Industry officials stated that affordable fiber deployment would improve internet quality, support growing data consumption, and strengthen Pakistan’s digital economy.
Telecom operators also stressed that better broadband infrastructure is essential for the development of sectors such as education, health care, ecommerce, and digital banking.
Concerns Over Tax Disputes and Compliance Costs
The telecom sector additionally recommended withdrawing the Commissioner’s authority under Section 147(6B) of the Income Tax Ordinance 2001 to reject taxpayers’ advance tax estimates.
According to the proposal, the current mechanism increases disputes, litigation, compliance costs, and uncertainty for businesses operating in Pakistan.
The industry maintained that simplifying the taxation process would improve ease of doing business and reduce unnecessary administrative burdens on companies.
Telecom operators said a stable and predictable regulatory framework remains essential for attracting long term investment into the sector.
Pakistan Still Faces Connectivity Challenges
The recommendations come at a time when Pakistan continues to face major connectivity gaps despite rapid growth in digital services worldwide.
According to the telecom industry, more than 30 percent of Pakistan’s population still lacks access to 4G services, while nearly 12 percent remains without basic mobile coverage.
Industry officials stated that sustainable policies and investment friendly reforms are necessary to bridge the digital divide and improve nationwide connectivity.
The telecom sector maintained that supporting operators through tax reforms and infrastructure incentives would help accelerate broadband expansion, improve digital inclusion, and contribute to overall economic growth.
Experts believe that stronger telecom infrastructure will also play a critical role in supporting Pakistan’s future digital economy ambitions, including ecommerce, fintech, online education, and smart governance initiatives.