A new report by Frontier Economics has warned that Pakistan’s 37% tax burden on mobile services ranks among the highest in the world and is severely restricting digital expansion. The study argued that excessive taxation is limiting mobile affordability, reducing smartphone adoption, and slowing economic digitisation across the country. Released in Islamabad during an event hosted by Jazz, the report urged policymakers to reduce taxes immediately to support long-term economic growth and increase digital inclusion nationwide.
According to the report titled Unlocking Digital Growth by Reducing Sector Taxation in Pakistan, mobile consumers currently face several overlapping taxes and regulatory charges on telecom services. These include a 19.5% sales tax, 15% advance income tax charged directly to users, and a 2.5% annual regulatory duty. In addition, telecom companies themselves remain subject to a 29% corporate tax alongside a separate 10% super tax, significantly increasing financial pressure on the country’s mobile sector and digital infrastructure investments.
Read more : Govt and traders near deal on fixed retailer tax scheme –
Furthermore, Frontier Economics recommended reducing the combined tax burden on mobile services from the current 37% to nearly 17%, arguing that such reforms could still remain revenue-neutral between 2027 and 2030. The consultancy projected that lower taxes would improve affordability, increase smartphone ownership, and expand digital connectivity across Pakistan’s growing population. It also estimated that annual government revenues generated from the mobile sector could rise from nearly $900 million to approximately $1.6 billion during the period between 2031 and 2035.
The report also highlighted Pakistan’s continuing dependence on mobile connectivity despite limited smartphone access among a large share of the population. According to the findings, nearly 68% of Pakistanis aged 15 and above still do not own a smartphone, reflecting serious affordability challenges within the market. Frontier Economics warned that multiple sector-specific taxes on mobile services and devices have made Pakistan one of the world’s highest-taxed telecom markets, ultimately slowing progress toward broader digital and economic transformation goals.
Read more : Pakistan seeks $200M ADB loan for digital taxes –
Additionally, the consultancy stated that the country has fallen into what it described as a “tax trap,” where authorities increasingly depend on taxing the formal telecom sector for revenue collection. However, the report argued that excessive taxation discourages investment in telecom infrastructure, weakens demand for digital services, and reduces opportunities for economic formalisation. Analysts further warned that higher mobile costs continue preventing millions of citizens from fully participating in digital banking, online education, e-commerce, and modern communication services across Pakistan.
To address these concerns, Frontier Economics advised the government to gradually shift away from sector-specific consumption taxes and extra surcharges directly affecting mobile users. The report stressed that reducing taxes on mobile services should become a national policy priority to improve affordability, increase digital adoption, and encourage broader economic activity. Experts believe that meaningful tax reforms could strengthen Pakistan’s long-term revenue base while also accelerating technological development, business innovation, and financial inclusion across underserved communities nationwide.