ISLAMABAD: The telecommunications sector in Pakistan has put forth a comprehensive budget proposal to the govt, pointing out that Pakistan finds itself in dire need of the telecom sector just at a time when increased taxes, operational costs, and depreciated currency rates have made the sector unsustainable financially. “Telecom budget recommendations Pakistan 2026” – as presented by the Telecom Operators’ Association to the Ministry of Information Technology and Telecommunication – cover five particular issues on which the existing tax/duty regime is hindering digitalization and the expansion of broadband networks as well as investments in next-gen networks.
Telecom Budget
The telecom budget proposals have various points of focus under the Income Tax Ordinance. The telecommunications sector is calling for reduction in withholding tax according to Section 153 of the Income Tax Ordinance from 6% to 4%, making it flexible, thus not a minimum tax, which the companies have to pay irrespective of their profits or losses. The second issue relates to increasing the carry-forward period for turnover tax from two to five years under Section 113.
In addition, the proposals in the Pakistan 2026 budget for the telecom sector include a recommendation to cut down the advance income tax on telecom services from 15 percent to 8 percent due to the fact that the current levy is a heavy burden on prepaid and low-income consumers who should benefit the most from digital inclusion initiatives. The high cost of prepaid mobile phone services deters people from becoming digitally active.
Tax exemption on imports of 5G devices can mobilize Rs12 billion in investments
The most structurally important proposal made by the telecom budget is the call for zero customs duty on 5G and fixed-line telecommunications devices – including network infrastructure, mobile phones, server systems, batteries, SIM cards, and other ancillary equipment. The current high level of taxes imposed during the process of importing such devices makes their deployment expensive for telecom providers and thus slows down the provision of advanced telecom services in remote or disadvantaged regions.
According to the industry, reducing import duties on 5G equipment could result in an estimated Rs12 billion being freed up for investment in network expansion and digital infrastructure, something which is currently not possible due to existing import duties. With the imminent launch of Jazz, Zong, and Ufone’s 5G services by August 2026, eliminating duties on such equipment will have a tangible effect.
Duty on optic fiber import reduced from 67% to 5% focuses on bottleneck in broadband sector
The telecom budget proposals made by Pakistan for 2026 list the optic fiber cable import duties as the largest bottleneck in the development of broadband networks in Pakistan. It is being recommended to the government that the total duties and taxes on optic fiber cable imports be brought down from around 67% to 5%. This would mean a huge reduction in the costs involved in establishing the necessary broadband network infrastructure in the country.
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Fiber installation is essential for fixed broadband growth, but with a 67% optic fiber duty rate, each kilometer installed costs the telecom companies much more than their foreign competitors in countries where import duty rates have been rationalized. In its proposed budget for Pakistan 2026 package, the telecom budget proposals present the reduction in optic fiber duty as an infrastructure investment, which would create much more economic value than the lost tax revenue itself.
Industry pleads for government to strip away power of Commissioner to deny advance tax estimates
Pakistan 2026’s telecom budget proposal for Pakistan also contains another procedural request besides requesting reduced rates on taxes. Industry is pleading for the stripping away of the power of the Commissioner to deny advance tax estimates under Section 147(6B) of the Income Tax Ordinance. The rationale behind such a plea is that denying of advance tax estimates causes unnecessary conflicts, results in high litigation costs, imposes additional compliance issues, and creates uncertainty among investors who need predictability in their operations.
The operators of the telecommunication sector in Pakistan present the entire proposal of the Telecom Budget Proposals Pakistan 2026 in the light of an integrated approach to facilitate investment as opposed to piecemeal attempts to reduce taxes from their own interests perspective, since the latter would ultimately enhance digital inclusion, access to broadband, digitization of finance, and overall economic growth.
