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29 Jun 2015

KPK and Sindh Should Follow Punjab in Removing Internet Taxes


Punjab government recently sent a strong message to other provinces by abolishing internet taxes that it imposed in May 2015, just a week before the annual budget.

Soon after imposing 19.5% taxes on internet, Punjab government realized that taxes were more harmful than good and decision was reversed with an aim that internet should spread in province with better than on-going trends. This point alone should be enough to convince KPK and Sindh governments to follow the footsteps of largest province that withdrew internet taxes with-in 10 days of imposing it.
Technically speaking, both KPK and Sindh governments deduct taxes from DSL broadband users only, while mobile broadband (3G/4G) isn’t taxed due to various reasons. This further narrows the reasons for both the provinces to tax internet where just a short number of DSL customers are taxed.
We have discussed before in detail that why internet taxation is a bad idea, but for those who missed our earlier coverage:

Impact of Taxes on Internet Uptake and Economy

  • In April 2014, there were mere 3.8 million broadband users, now, after auction of 3G/4G service the numbers of broadband subscriptions has crossed 19 million (15 million 3G/4G and 4 million fixed broadband users)
  • Countries, world-over, make special arrangements and policies for the growth of internet usage, because 10% Increase in Internet Penetration results into 1.5% Growth in GDP.
  • This growth is on higher side in developing countries.
  • Pakistan grew 8.3% broadband users in 2014-15, but still the total total Broadband Penetration in Pakistan at just 10% — meaning that there is still a huge potential for growth available.
  • This growth will be hampered with the new taxes and uptake rate won’t be same as it remained during past one year.
  • Slowness in internet uptake is going to directly impact variety of sectors including smartphone manufacturers, cellular companies, internet companies, startups, entrepreneurs. However, indirect impact is going to be felt by whole economy including media houses and TV stations, who serve a vast majority of users with their news and live streams through internet.
  • Jobs — over 900,000 of them that Anusha promised at the time of auction while citing the same PLUM research
  • e-health, e-education, e-banking, e-farming and other development projects will be halted
For those who are wondering that why internet shouldn’t be taxed, especially when our economy is badly stricken, then the idea is to develop multiple layers of taxable economy on the shoulders of internet while keeping internet itself a tax-free utility.
While we aren’t very enthusiastic about Sindh, KPK government (and PTI) is apparently putting special focus on education and youth development, broadband penetration will not only impact positively on academic ventures of the KPK government but it will also help flourish the high-tech startup ecosystem involving young educated minds from the province.
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