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Dawn exclusive: Contradictory letters deepen Rs47bn scam

Published Jul 28, 2012 02:05am


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As per the FBR notification signed by Member of Inland Revenue Service, telecom operators were given the legal cover with regard to non-recovery of FED on interconnect charges prior July 1, 2012. It was also said in the notification that mobile phone operators would start collecting FED on interconnect charges from July 1, 2012. - File photo

ISLAMABAD: The accountability authorities are calling it Rs47 billion scam and the telecom companies say no wrong has been committed.

It is difficult to figure out who is right but two letters written by Chief Commissioner of Large Taxpayers Unit (LTU), Islamabad, within a span of three days, with the second one reversing the orders contained in the first, makes the whole affair quite intriguing.

Dawn is in possession of some official documents which reveal that some top FBR officials were quite interested in processing the case in a hurry and implementing it in four days.

On June 27, the chief commissioner of LTU sent a letter to the Federal Board of Revenue recommending that no exemption should be given to mobile phone operators from the Federal Excise Duty (FED) on interconnect charges. The chief commissioner endorsed the findings of his sub-ordinate officers — commissioner and deputy commissioner — who stated in their reports that the cost of exemptions ran into billions of rupees.

Only two days later (on June 29), M/s A.F. Ferguson filed an application with the same Chief Commissioner of LTU on behalf of telecom companies, seeking FED exemption. The firm sought the exemption with retrospective effect in the three-page application.After the submission of the application, the chief commissioner took a U-turn and wrote the second letter (faxed to the FBR) on June 30, claiming that on the basis of “incorrect interpretation of the statue, telecom operators inadvertently and as a general practice” did not pay FED on interconnect service and recommended the FBR to grant FED exemption to mobile phone companies on interconnect charges. He also directed in the letter that all mobile operators were registered with the LTU, Islamabad, and there was no need for getting feedback from any other customs collectors or income tax commissioners.

On the basis of the June 30 letter, the FBR finalised a notification giving telecom companies a waiver from FED payment on interconnect charges with retrospective effecting, amounting to billions of rupees prior to July 1, 2012.

Normally, movement of files relating even to the most important and urgent nature takes several days in the FBR, but the case of mobile phone operators was processed on the same day on the directive of the then FBR chairman.

The first violation, according to documents, was the signing of a favourable notification without sending it to the ministry of law for vetting. It is legally binding that every legal draft should first be vetted by the ministry of law before it is formally issued.

Tax officials say the cost of exemption will cause a loss of Rs47 billion to the national exchequer. This position of the tax department was also confirmed by a case mobile operators have filed in Appellate Tribunal on the issue.

Official figures show that over the past four years (from 2007-08 to 2010-11), FED on interconnect charges was calculated at Rs26.034 billion payable by mobile phone operators.

Contrary to this huge amount, tax officials collected only Rs2.199 billion from M/s Pakistan Mobile Communication for the year 2008-09 on account of interconnect charges while Rs2.7 billion was recovered from M/s Pakistan Telecommunication Company.

This shows a contradiction in the position taken by mobile phone operators because while they say the FED was not leviable on interconnect charges, tax officials have already recovered more than Rs4.8 billion under the head. If the exemption notification of the FBR is implemented, the government will have to refund the collected amount. However, the notification is now in abeyance.

Even FBR’s junior tax officials involved in the processing of the case have raised concern over the two letters issued by the Chief Commissioner LTU, Islamabad, contradicting each other. These officers also voiced concern over the signing of the notification before it had been sent to the law division for vetting.

The notification was issued on the basis of the June 30 letter without sending it to the ministry of law.

As per the FBR notification signed by Member of Inland Revenue Service, telecom operators were given the legal cover with regard to non-recovery of FED on interconnect charges prior July 1, 2012. It was also said in the notification that mobile phone operators would start collecting FED on interconnect charges from July 1, 2012.


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Comments (31) Closed

Cyrus Howell Jul 29, 2012 02:03am
Only Rs47 billion. Pretty soon you will be talking about real money.
Ishrat Salim Jul 28, 2012 07:55am
Please note the period 2007 to 2011 PPPGovt wonder we prefer democracy
Saif Jul 30, 2012 12:03pm
In para 7 paper has discussed as ............signing of a favorable notification without............ Any one have the copy of that notification?
Hakeem Jul 28, 2012 08:48am
Democracy is the best revenge
malik Jul 29, 2012 04:49am
Syed Ahmed Jul 28, 2012 02:04pm
Rubbish - the democracy has brought down on its knees.
Saif Jul 30, 2012 11:56am
I challenge all of you including news paper story writer that no one under stands the issue there is no fraud of 47 billion,how many of you know about interconnectivity charges,did any one get the phone companies stance?
True Pakistani Jul 28, 2012 12:59pm
- this defines pakistan exactly what it is, what it was created for and what it will remain until it disintegrates.
usman Jul 28, 2012 10:31am
This is called >Ineptocracy> means>>> A system of Govermnet where the least capable to lead are ELECTED by least capable of PRODUCING, & where the members of society least likely to sustain themselves or succeed, are rewarded with foods and services paid for by the confiscated wealth of a DIMINISHING number of PRODUCERS
Disgusted Jul 28, 2012 01:34pm
Is there any honest person left in Pakistan?
Cyrus Howell Jul 29, 2012 02:07am
The civil servants can move fast when they want to, and get things done for the right people with just one telephone call.
drmh Jul 29, 2012 08:01am
Muhammad Jul 29, 2012 11:02am
Why these dacoits or lesser gods are not punished by hanging with confiscation of all their wealth? Why their families live in luxuries with foreign education and tours are not punished for spending lavishly when they know their earniers' (family bread earner) true, honest pay or income? A seth or even a small business owner would almost kill a dishonest employee with after-effects for his family!
Honest! Jul 29, 2012 10:50am
Yes, Zardari!
Practical Jul 29, 2012 10:40am
Pakistan ka matlab kya hai?
ejaz Jul 28, 2012 03:10am
height of incompetency and corruption!
kamran Zaki Jul 28, 2012 04:05am tricks ...progress ...way to go...chairman must have recieved 1 BN rs to sign the new letter.
mehtab khan Jul 28, 2012 06:02am
Bhai kia qeemat lagai is khanchey mein se sadion ke Gadagari key azaley ki lei - a zameer farosho, watan farosho, eeman farosho : apni dharti maan (Pakistan) ki bhi ek Qeemat fix kar do takeh Roz Roz ek nia Gahk dhondney kee zarurat pesh na aey Allah Pak to he Hamara Muhaiz Hay and Is Mah-e-Ramzan mein hamari dua qabul farma au'r in luteron, dakuan and zameer faroshon sey hamen nijat dila. Amin
Saad Jul 28, 2012 07:02am
sharm tum ko magar nahi ati.............
Saad Jul 28, 2012 07:01am
ilas Jul 28, 2012 03:59pm
When the President and his misters are all doing it then why cannot others in power do the same.
Hasan Jul 29, 2012 01:31pm
Where Chief justice and where is SooMoto??
Saeed Chaudhry Jul 28, 2012 06:07pm
I hope our SC should would take a notice. Recovery from these should help reduce the burden on the honest law abiding tax payers - a fast dwindling number in the country.
akhter husain Jul 28, 2012 07:03pm
In spite of all the mess this government may have caused,democracy must be given a chance.After all we will learn to manage our affairs some day.
fida sayani Jul 28, 2012 10:11pm
only honest person to die in Pakistan was Mohammad Ali Jinnah.
Afee Jul 28, 2012 11:02pm
Don't you guys appreciate that someone is digging stuff up for correction. Corruption does not eliminate itself, the civil society has to mature to expose any wrongdoing so that it could be prevented. I would say great job, taking the matter up and fighting corruption, that has never been done before. Pakistanis are doing great job exposing corruption, goodjob, don't relent.
Saif Jul 30, 2012 11:50am
I challenge all of you including news paper story writer that no one under stands the issue there is no fraud of 47 billion , is any one tried to get the contention of telecom companies, how many of you know what are interconnectivity charges?
usman Jul 29, 2012 02:02pm
few are there remaining in pakistan but they are not been public or if they are they have no power like edhi
riz Jul 29, 2012 12:25am
Duain kaam ati tu kub ka sub kuch theak ho jata... khud kuch karna hoga... warna hum ramazan main dua hi kartey rah jain gain
m.y.saleem Jul 29, 2012 01:37am
in pakistan ,it will never be found out that who is cheating who.everybody is crying day and night that corruption worth 500 billion is taking place but there is nobody responsible including chairman nab.isi distributed money but there is no action.everybody is having hey time in pakistan.
toseef25 Aug 01, 2012 09:39am
Usman, I totally agree. There are a few honest and capable people in Pakistan who can and want to deliver. But media and political system is not allowing them to shine.