Cellular companies deduct more tax than they pay, claims FBR

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ISLAMABAD: The Federal Board of Revenue (FBR) has found discrepancies in cellular companies’ billing and costing for mobile services, suggesting that mobile phone operators deduct more taxes from consumers than they transfer to the government.

“Data uploaded by Telenor on FBR’s new IT-based portal reflects that the company has not paid the government Rs267 million in additional taxes between July and November 2017,” FBR Director General (Withholding) Mehmood Aslam told the Senate Standing Committee on Information Technology on Thursday.

The body, which met for a briefing on the mechanism devised for the collection of taxes, such as general sales tax (GST) and withholding tax from the cellular operators, was also told that proceedings under the Income Tax Ordinance 2001 were underway and Telenor had been asked to explain its position.

“As soon as Telenor responds to our queries, we will have clear answers for the committee,” he said.

Senators seek audit of withholding tax collected by all telecom companies

Over the past five years, the committee observed, mobile phone operators overcharged subscribers, who ended up paying more money for less talk-time.

Members also had reason to believe that the telecom companies were evading taxes, but FBR, which lacks a mechanism to conduct audits of millions of subscribers’ transaction data, could not confirm these allegations.

However, Mr Aslam told the committee that a new mechanism developed to improve revenue collection from telecom service providers had enabled the government to plug the loopholes in the existing tax collection system.

In his briefing, he explained that in order to analyse millions of transactions from each cellular company on a daily basis, FBR had devised an IT-based mechanism to ensure the effective monitoring of withholding taxes paid by the mobile operators.

All four mobile phone companies are required to upload their monthly customers’ transaction data on the software utility portal, Mr Aslam explained, adding: “The operators were initially reluctant to cooperate, until the Pakistan Telecommunication Authority was asked to assist FBR in improving its tax collection mechanism,” he said.

With this new mechanism, FBR can now check the transaction data of subscribers for the entire year, as well over the past five years.

“In the case of Telenor, field officers have started conducting an audit of withholding tax deducted from consumers and deposited at the company’s premises. FBR will conduct similar audits for all cellular operators to ensure better transparency,” Mr Aslam said.

The tax official also claimed that four cellular mobile operators owed the government Rs89 billion in sales taxes accumulated over past several years, and another Rs62 billion in income taxes, which the operators have challenged in court.

Committee chairman and ANP senator, Shahi Syed, seemed disappointed and said that the FBR had not found the full quantum of discrepancies that existed.

“According to my calculations, operators owe the government anywhere between Rs7 billion to Rs10 billion in taxes,” he said.

PTI Senator Azam Swati called tax evasion “theft”, saying: “FBR should conduct withholding tax audits of cellular firms for the past ten years”.

Senator Syed gave FBR until January 24, when the committee will meet, to submit a detailed report on taxes collected from all cellular service providers.

Published in Dawn, January 12th, 2018

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