ISLAMABAD: The government needs to rationalise taxation on the telecommunication sector to encourage investments, State Minister for Information Technology Anusha Rehman said on Thursday.

`The current taxation mechanism is strangulating the business environment for cellular companies,` Ms Rehman told the National Assembly Standing Committee on Information Technology, explaining that telecommunication companies were hesitant to expand.

Although the issue of taxation was not on the agenda, the minister brought it up and urged the committee chairperson, PML-N MNA retired Capt Mohammad Safdar, to hold a separate meeting to address concerns regarding heavy taxation by federal and provincial governments on the telecommunication industry.

`There is taxation on almost everything; on every service and every imported piece of telecom equipment etc, whether it is federal excise duty or sales tax or in the form of advance taxation etc,` she said.

MNA Awais Ahmed Khan Leghari also described the current taxation on the telecommunications sector as `unhealthy`.

Ms Rehman said that federal and provincial governments had separate taxation structures that put burden on cellular operators that were eventually passed on to sub-scribers. `The Punjab government removed the 19.5pc taxation on broadband services [at the ministry`s request].

Pakistan has moved from a separate information technology and telecom structure into a single information and communication technology (ICT) environment.

`In a mere two years, the broadband base in Pakistan has grown from an insignificant 3pc to 15pc (or 25 million subscribers) and growing, as ICT has becoming a common usage tool,` the minister said.

The minister also quoted the international GSMnews, which described Pakistan as having the 2nd highest taxation structure in the world. `Foreign investors are not considering Pakistan as an attractive business model,` she said.

She added that provincial governments had been harassingIT businessesfor taxes other than what the federal government was charging the sector.

According to an official from the Pakistan Telecommunication Authority (PTA), an assessment of the market had showed that the market was unfavourable to auction more spectrums to improve telecommunications and broadband services in the country.

`Cellular companies may not want to invest more because Pakistan does not offer a business case under such a heavy taxation structure,` the official said.Staf f Reporter