The Pakistan Telecom Authority in their December 2008 quarterly review gives the reasoning behind the government’s decision to impose high taxes on mobile phone use. To reduce the high fiscal deficits, the government had increased taxes. The increase for the telecom sector was over 40 percent; for other sectors it was only seven percent. However, the end result was unexpected, though it could have been predicted from economic theory. In the two quarters after the tax increase, the tax revenue from mobile declined.
How was the telecom market affected? In the same report, a figure shows how the subscriber base increased over time. However, the rate of growth declined in recent quarters. In 2007, the rate of growth was 9.9 percent; 2008 ended with a minus 0.3 percent growth. The average revenue per user went from USD 3.1 in the last quarter of 2007 to USD 2.58 during the last quarter of 2008.
Similarly in Sri Lanka, government has seen the mobile industry as an easy source of revenue through taxes and levies. There may be lessons for Sri Lanka from the counter-productive outcomes of Pakistan’s efforts to milk the golden mobile goose.
LIRNEasia’s T@BOP3 study conducted in 6 Asian countries indicated that only 38 percent of households at the bottom of the pyramid in Pakistan have access to mobile phones. There are consumers waiting to adopt mobile phones. Shouldn’t the government make efforts to make them available to them? Getting more people connected and taking a reasonable share of their payments as tax would be more productive than imposing taxes that bar them from becoming customers and deprive the government of tax revenues.
The PTA is to be applauded for doing these kinds of analyses. One hopes that the government of Pakistan will take remedial action to get telecom growth back on track. One hopes that other regulatory agencies will conduct and publish similar studies.
5 Comments
Babar Bhatti
The blogger community has been writing about this but apparently the government does not read their blogs. Just this month the govt tried to impose a tax on sms!
Rohan Samarajiva
We were informed by the PTA chair Dr Yaseen at the recent LIRNEasia@5 conference that this study was used to successfully persuade the Pakistan Ministry of Finance to reduce taxes.
LIRNEasia CEO at UNESCO World Press Freedom Day Signature Event in Brussels, Belgium
Each year, UNESCO celebrates World Press Freedom Day globally. The main/signature event is held in a different region or country each year.
FutureWORKS Asia launches second Call for Proposals: Seeking solution-oriented research for a sustainable and inclusive future of work
LIRNEasia, with the support of the International Development Research Centre (IDRC), is pleased to announce the second Call for Proposals under the FutureWORKS Asia initiative. We are inviting proposals for gender-responsive, solution-oriented, and policy-relevant applied research projects that will help shape a sustainable and inclusive future of work in Asia.
Starlink in Sri Lanka: Legal and Regulatory Perspectives from LIRNEasia’s Chair Prof. Rohan Samarajiva
Sri Lanka is preparing to roll out Starlink, an innovative satellite-based telecommunications service provider. In an article published in Views Bangladesh on June 2, 2025, LIRNEasia Chair Professor Rohan Samarajiva examined the legal and regulatory dimensions of Starlink’s entry into Sri Lanka.
Links
User Login
Themes
Social
Twitter
Facebook
RSS Feed
Contact
12, Balcombe Place, Colombo 08
Sri Lanka
+94 (0)11 267 1160
+94 (0)11 267 5212
info [at] lirneasia [dot] net
Copyright © 2025 LIRNEasia
a regional ICT policy and regulation think tank active across the Asia Pacific