Report Warns Against Pakistan’s High Mobile Tax Burden

Global consultancy Frontier Economics has warned that Pakistan’s cumulative tax burden on mobile services, estimated at 37%, ranks among the highest internationally and is negatively affecting mobile penetration, digital expansion, and long-term revenue generation.

The observations were presented in a report titled Unlocking Digital Growth by Reducing Sector Taxation in Pakistan, launched by Jazz in Islamabad on Monday.

According to the report, the existing taxation framework applicable to mobile services includes 19.5% sales tax, 15% advance income tax imposed on consumers, and a 2.5% annual regulatory levy.

The study further highlighted that telecom operators are additionally subject to 29% corporate income tax along with a 10% super tax.

Frontier Economics recommended reducing the effective tax burden on mobile services from 37% to 17%, arguing that such reforms could support economic growth while remaining broadly revenue-neutral for the government between 2027 and 2030.

The consultancy projected that sector-related government revenues could rise from approximately $900 million to nearly $1.6 billion during the 2031-2035 period if the proposed reforms are implemented.

According to the report, Pakistan continues to operate as a predominantly mobile-first economy, yet a substantial portion of the population remains without access to smartphones.

The study stated that nearly 68% of individuals aged 15 years and above in Pakistan currently do not own a smartphone device.

The report further noted that Pakistan imposes multiple sector-specific taxes and regulatory charges on mobile services and telecom equipment in addition to general economy-wide taxation, placing the country among the most heavily taxed telecom jurisdictions globally.

It added that the overall burden results from the cumulative impact of layered taxation measures rather than any single levy.

According to Frontier Economics, elevated taxation levels increase the cost of connectivity, weaken affordability, suppress consumer demand, and discourage investment in telecommunications infrastructure, thereby affecting broader digitalisation and economic documentation efforts.

The consultancy further cautioned that Pakistan had entered what it described as a “tax trap,” whereby authorities increasingly rely on the telecom sector for revenue collection because of its formal and documented economic structure.

However, the report argued that excessive sectoral taxation risks undermining wider policy objectives related to digital inclusion, economic formalisation, and long-term expansion of the national tax base.

The consultancy recommended that policymakers gradually move away from sector-specific consumption taxes and surcharges that directly increase end-user costs.

It further stated that reducing taxes imposed on mobile usage and telecom sector revenues should be treated as a strategic policy priority to improve affordability, encourage digital adoption, and support sustainable economic growth.