The Asian Development Bank (ADB) has recommended the government to implement a uniform 5 per cent general sales tax (GST) on all digital transactions to promote digital payments and e-commerce platforms across the country, reduce cash-related inefficiencies and document the economy.
In its recent report titled ‘Pakistan’s Digital Ecosystem’, released on Tuesday, the ADB warned that heavy and unsustainable taxes on digital infrastructure in the country pose a serious threat to foreign investment, growth and the spread of digital services.
The report states, “Pakistan’s digital infrastructure faces a major challenge from high taxation. Federal and provincial taxes on this sector are among the highest in the world and in the region, and tax policies are generally inconsistent.”
“The cost of providing the service further exacerbates the digital divide, particularly for women and marginalized groups, who face disproportionate financial and cultural barriers to Internet access,” the report said.
According to the report, Pakistan’s telecom sector is “suffering from declining revenue and foreign investment, reflecting a challenging business environment.”
The report emphasised that the government should focus on re-engagement with investors and industry stakeholders to address their concerns and provide incentives and facilitation for investment and operations in the country.
In its recommendations, the ADB said that “all direct and indirect digital infrastructure taxes should be rationalised, made competitive with other countries, and tax rates fixed for the sector for at least 10 years.”
Pakistan currently has 56.5 per cent broadband coverage and 137 million subscriptions, according to the report, each province imposes a regressive sales tax of 19.5 percent on internet service usage, higher than any other service.
