ISLAMABAD: High provincial taxes are becoming a key barrier to investment and expansion of digital infrastructure in many regions. Regulatory hurdles, power outages, and frequent internet shutdowns compound this problem.
Talking to Media, Dr. Jorkanda Tomkova, consultant at the World Bank on IT and Digitisation, highlighted that one of the main concerns of investors thinking about investing in digital infrastructure was high provincial taxes.
“The increased tax burden drives up the operating expenses considerably, deterring companies from investing in vital digital infrastructure like data centres and high-speed internet. The additional financial strain frequently results in less money being available for infrastructure projects, which slows down the rate of technical innovation and hinders economic expansion,” she said.
She pointed out that apart from the high tax rates, the provinces impose complex and costly regulatory requirements on laying down the telecom infrastructure. These issues involve obtaining numerous permissions and paying various fees, which can delay projects and inflate costs.
“The red tape not only discourages new investments but also frustrates the existing businesses trying to expand their digital infrastructure. Simplifying the regulatory processes could significantly ease the burden on investors and accelerate infrastructure development,” said Jorkanda.
She suggested that the provinces must take a more comprehensive approach to the development of digital infrastructure in order to address these issues. This entails reviewing the tax laws in addition to dealing with the operational, power, and regulatory concerns.
“A climate that is more conducive to digital investments can be produced by investing in dependable power sources, streamlining the approval process for infrastructure projects, and guaranteeing consistent internet connectivity.”
Talking to Media, Babar Majid, Chief Executive Officer of the National Information Technology Board (NITB), said power outages make the already challenging digital infrastructure projects even more difficult. Maintaining uninterrupted internet services and running data centres require reliable electricity, he said.
He explained that digital infrastructure reliability and efficiency were jeopardized in areas with frequent power outages. Significant infrastructure projects are unlikely to be undertaken by companies or investors in locations where the possibility of power outages endangers their operations.
Babar mentioned that another major problem impeding the establishment of digital infrastructure was the frequency of internet shutdowns. In addition to impeding day-to-day operations, these disturbances also produce an unstable atmosphere for long-term investment.
When the internet uptime is uncertain, investors hesitate to commit to infrastructure improvements because frequent shutdowns can reduce the value of their investments and negatively impact overall business performance.
He lamented that 19.5 percent GST levied on broadband services had not prompted the provincial governments to take action to increase the demand for internet connection. The initiatives that can increase internet usage and open new markets are not reinvested with tax income from the GST on broadband services. Technological advancement will stagnate if there are no policies that stimulate demand for digital services and provide the private sector with an incentive to invest in new infrastructure.
He suggested the governments should introduce tax incentives or subsidies aimed at technology and infrastructure initiatives and promote the expansion of digital infrastructure by lowering the business costs and enticing private sector investment. –INP
