Mobile Tax Cuts Could Boost Pakistan and Bangladesh Economies

For hundreds of millions of people in Pakistan and Bangladesh, a mobile phone isn't a luxury. It's their gateway to banking, business, and the digital economy.

Yet both countries impose some of the world's highest taxes on mobile services. Bangladesh taxes mobile providers at 47% of revenues, while Pakistan takes 37%, far above global averages.

A new economic analysis by Frontier Economics reveals what happens when those barriers come down. The research, commissioned by digital operator VEON, shows that smart tax reform could unlock extraordinary economic growth while actually boosting government coffers.

The numbers tell a compelling story. If Bangladesh reduced mobile taxes from 47% to 23%, the country's GDP per capita growth rate would jump from 6.6% to 7.2% annually. In Pakistan, cutting taxes from 37% to 17% would boost growth from 4.2% to 4.5%.

The report found that every 1% increase in mobile penetration adds 0.115 percentage points to GDP per capita growth. As mobile connectivity becomes more embedded in daily economic life, that impact likely grows stronger.

Here's the part that makes policymakers take notice. The initial dip in mobile tax revenue would reverse quickly as the broader economy expands. Government revenues would surpass baseline levels by 2030 in Bangladesh and 2031 in Pakistan.

The Ripple Effect

The transformation extends far beyond faster internet speeds. In both countries, mobile money platforms are revolutionizing financial inclusion for people who've never had bank accounts.

Lower mobile costs mean more people can afford digital financial services. Small businesses can process payments electronically. Families in rural areas can send money safely without traveling to cities.

"Mobile connectivity is the foundation of digital access and economic development in frontier markets like Bangladesh and Pakistan," said Clive Kenny, Senior Principal at Frontier Economics. The research backs up what telecom operators see daily on the ground.

VEON CEO Kaan Terzioglu emphasized that mobile connectivity isn't a premium service in these markets. It's how ordinary people participate in the formal economy, access healthcare information, and build businesses.

The report arrives as both countries pursue ambitious digital transformation goals. Pakistan and Bangladesh are mobile-first economies where smartphones serve as the primary internet access point for most households.

Lower taxes could accelerate infrastructure investment, extending coverage to underserved areas. Better connectivity means farmers can check crop prices, students can access online education, and entrepreneurs can reach new customers.

The findings offer a roadmap that turns conventional budget thinking upside down: sometimes collecting less tax on one sector generates more total revenue by unleashing broader economic activity.