The Asian Development Bank (ADB) has identified Pakistan’s telecommunication sector as burdened with the highest effective tax rate in South Asia, urging authorities to implement regulatory adjustments to improve competitiveness and reduce consumer costs.

Tax Burden Hampers Industry Growth and Investment

ADB’s findings highlight that telecom taxes ranging from excise duties, withholding taxes, sales tax, and licensing fees significantly increase the cost of mobile broadband, leading to slower infrastructure development and reduced investment attractiveness.

Mobile Broadband Priced Among the Most Expensive in South Asia

As a result of heavy taxation, mobile broadband subscriptions in Pakistan are identified as some of the most expensive in the region. This undermines digital inclusion goals and contrasts with neighboring countries where data access is more affordable and widespread.

ADB Recommends Streamlined Tax Reforms and Incentives

To boost sector performance, the ADB recommends:

  • Rationalizing excise duty and VAT
  • Revising telecom-specific levies
  • Introducing tax waivers on capital equipment
  • Offering tax credits for rural and underserved investments
    These reforms aim to attract new entrants and expand digital connectivity in rural regions.

Potential Economic and Consumer Benefits of Reform

By reducing tax barriers, Pakistan could:

  • Lower data costs
  • Expand 4G/5G coverage
  • Encourage private investment in fiber and rural infrastructure
  • Enhance digital service penetration and broaden the tax base through growth

Stakeholder Concerns Over Regulatory Uncertainty

Industry stakeholders warn that without prompt policy changes, Pakistan risks losing telecom operators and deterring new players. High operational costs discourage competition and may slow upcoming initiatives in areas such as IoT, smart cities, and e‑government services.

Policy Dialogue Needed to Align Taxation With Growth Goals

The ADB stresses the importance of initiating public-private dialogues, legislative adjustments, and strategic policymaking to align tax structures with national digital transformation targets and sectoral growth benchmarks.

Conclusion: Reforming Telecom Taxes Is Key to Digital Inclusion

The ADB report concludes that addressing excessive taxation in Pakistan’s telecom sector is crucial for promoting digital connectivity, enabling broader economic participation, and meeting long-term development objectives.