Kathmandu. In the last seven years, the revenue of telecom service providers has decreased by about 28 percent. According to Nepal Telecommunication Authority, the income of the two telecom service providers has been reduced to Rs 71.21 billion in the last fiscal year compared to Rs 98.71 billion in the fiscal year 2017/18. It has been steadily declining.

The impact of the declining income of the telecom has been seen on the profit and the investment of the companies has also been affected by the shrinking of the profit. Experts in the telecom sector claim that the telecom sector is facing crisis due to the failure to increase the source of income in recent years. Experts believe that this sector will be in trouble if policy reforms are not made immediately. Some argue that due to the contraction in income and profit, the necessary investment in infrastructure including ‘5G’ has not been made.

Bhesh Raj Kandel, former chairman of Nepal Telecommunication Authority (NTA), said that although telecommunication service should be considered as an essential service, tax has been imposed in Nepal like a luxury goods. According to him, at present, the tax has been imposed on the telecommunication company under various headings. Currently, telecom companies have to pay 30 percent corporate tax, while other sectors have to pay only 25 percent. Therefore, Kandel believes that it is necessary to review the tax levied in the telecommunication sector.

According to Nepal Telecom, policy problems, use of OTT and high renewal fees are the reasons for the continuous decline in the company’s income. Apart from this, Telecom has also said that due to the low profit, there is a high tax.

According to Nepal Telecom, the company made a profit of Rs 2.66 billion out of Rs 38.73 billion in the fiscal year 2081÷82. In the previous fiscal year, the company had posted a net profit of Rs 6.11 billion. A major chunk of the company’s profit was spent on renewing its GSM license. In the last fiscal year, the company had spent Rs 20 billion on renewal, apart from this, the profit has decreased significantly due to the payment of various headings of taxes.

According to telecom service provider Ncell, the telecom sector is one of the highest tax payers. Some time ago, former CEO of Ncell, Jabbor Kayumov, had said that the profit was affected as the telecom companies had to pay a large part of the tax and fees to the government. According to him, on an average, Nepal’s telecom service providers are paying 50 to 60 percent of their income to the government in the form of taxes and fees. This tax ratio is comparatively higher than in other countries. Not only that, the contribution of the telecom sector to Nepal’s gross domestic product (GDP) is also decreasing. Currently, the share of the telecom sector in the GDP is only one .2 percent. This is 3.4 percent of the total revenue. According to Ncell, telecom companies are contributing three times to revenue compared to the tobacco and liquor industries. Similarly, in the FY 2081÷82, Ncell earned Rs 32.48 billion, out of which Rs 16.98 billion was paid under tax and 13 different headings. This fee is equivalent to 52 percent of the income.

“Due to declining income and high tariffs, we have not been able to invest more,” Ncell said in its report. We have also suggested a review of tax titles and rates in the draft of the new Telecommunications Act, if the tax rate imposed in the telecom sector is not reduced, it will be difficult to survive. ’

Ncell has already paid NPR 17 billion under various headings such as GSM license, ISP license, TSC, OT, net VAT payment on sales, customs duty, TDS, advance tax, royalty, RTDF, frequency fee, social service and others.

According to Nepal Telecommunication Authority, in the fiscal year 2080÷81, telecom companies earned Rs 68.5 billion and paid Rs 37.7 billion to the government in taxes and fees.

Currently, they have been paying 13 percent VAT along with 10 percent Telecom Service Tax, 4 percent Royalty, 2 percent Ownership Tax (on land and SIM cards) along with various fees and anti-tax from their income.

According to experts, Nepal has adopted the highest tax rate among the 10 countries of the Asia-Pacific region. In China, telecom companies have to pay 6 percent VAT and 25 percent company tax, while in India there is a provision of 18 percent GST and 25 percent corporate tax, in Thailand 7 percent VAT and 20 percent corporate tax.

According to the GSMA Mobile Connection Index, 2023, Nepal is in the 119th position. The report states that where telecom companies have to pay less tax, investment, network expansion and service quality are higher. ’

Studies by the World Bank and the International Telecommunication Union have also shown that for every 10 percent increase in broadband access, the country’s economic growth rate will increase by 1.3 percent. According to the concerned parties, it is necessary to completely eliminate the sector-specific taxes such as 10 percent telecom service fee, 2 percent ownership tax, four percent royalty and two percent rural telecom development fund.

Likewise, the draft of the Telecommunication Act has also suggested reducing corporate tax rate to 25 percent from the current 30 percent and limiting the license fee of Rs 20 billion for five years to 8 percent of the annual income of the company.