ISLAMABAD: An information technology-based mechanism has been developed by the Federal Board of Revenue (FBR) to improve revenue collection from the cellular mobile operators (CMOs).
This was revealed by FBR Withholding Director General Mehmood Aslam while briefing the Senate Standing Committee on Information Technology.
“The new system will enable the government to plug loopholes in the existing tax collection system from the operators,” he added.
The official briefed the committee members about the mechanism devised for tax collection including the general sales tax (GST) and withholding tax (WHT) from cellular operators.
The committee spent the last six years trying to figure out if CMOs were overcharging their subscribers who are paying more money for less talktime. The members also have reasons to believe that the telcos are evading taxes, the FBR official said.
The FBR, which lacked a mechanism to conduct audits of millions of subscribers’ transactional data, could not confirm these allegations.
However, Mr Aslam clarified that the operators were not evading taxes.
“However, there are certain new areas in which the FBR feels telecom companies have not paid additional taxes. It could be that the operators may have exemption certificates. We have asked operators to explain their position,” he added.
The official elaborated that all four mobile phone companies are now required to upload their monthly customers’ transactional data on the software utility portal.
He explained that in order to analyse millions of transactional data of each cellular company on daily basis, FBR launched a pilot project by devising an IT-based mechanism to ensure effective monitoring of withholding taxes by the operators.
“Out of the four, FBR conducted the forensic audit of one cellular company and found certain discrepancies. Due to lack of resources, FBR is unable to conduct simultaneous forensic audits of all companies. However, FBR will scrutinise transactional data of the remaining telcos soon,” he said.
Responding to these contentions, Telenor’s Chief Corporate Officer Kamal Ahmad claimed that all operators are law abiding corporate entities and carry out all operations in strict accordance with the local laws and fulfil obligations while upholding the highest standards of corporate ethics and integrity.
“We have contributed immensely to the national exchequer in the form of direct and indirect taxes. Certain territories in the country are tax exempted, therefore in accordance with the law and as per industry practice, we have not been deducting tax from these exempted territories,” he said.
In response to a question from PTI Senator Shibli Faraz on overcharging subscribers on pre-paid cards, the Telenor official explained to the committee that on Rs100 card, a subscriber pays 19.5 per cent GST, 12.5pc advance income tax and another 5pc charged by the telecom companies as service charges. “After these deductions subscriber is left with roughly Rs63 for making calls and using data services,” he added.
He explained that heavy taxation on cellular industry is one of the most pressing challenges of doing business in Pakistan. He urged the committee members to help cellular operators in convincing the government to reduce this burden to help the economy grow.
The committee was briefed that the telcos provided 14, 000 direct employment and hundreds of thousands of indirect jobs. Since 2004 till 2017 the industry has invested some $15 billion in the country. In 2016-17 the industry injected $635 million. After banks, energy and agriculture sectors, telecom industry is the fourth most heavily taxed sector in the country.
The committee was met here under the chairmanship of Senator Shahi Syed while senators Abdul Rehman Malik, Syed Shibli Faraz, Osman Saifullah Khan, Najma Hameed, Naseema Ehsan and Javed Abbasi also attended the meeting.
Later in a meeting attended by LMKE, CDA, FIA and PTA discussed all the agendas. On which FIA played a positive role and directed all the parties to resolve the issues with mutual understanding.
