PTA Directed to Ban Tax Evading Telecom Companies from 3G Auction

Tax-EvasionPakistan Telecommunication Authority has been asked by Senate Sub-Committee on Ministry of Information Technology (MoIT) to not to allow telecom companies to participate in upcoming 3G spectrum auction that are allegedly involved in evading PKR 47 billion taxes.

These directives were issued after the former Director General Large Taxpayer Unit (LTU) Islamabad and existing Member Inland Revenue Service Ijaz Hussain Shah confessed that he was verbally pressurized for waiving telecom companies the taxes of PKR 47 billion on inter-connections revenues.

The five telecom companies in the alleged tax evasion are identified as National Telecommunication Corporation, Ufone, Telenor, Pakistan Mobile Communication (Mobilink), and Warid.

Sub-Committee met in the parliament house with Anusha Rehman as chairperson to collect facts about the mega tax evasion scam.

Committee heard the viewpoint of the Former Member IR and Member Training FBR Shahid Hussain Asad, Chief Automation Abdul Sattar Aora and Secretary IR Fahad Chaudhry. Former DG LTU Islamabad and present FBR Member IR Ijaz Hussain Shah, Chief Income Tax Muhammad Iqbal and other officials of FBR were also present on the occasion.

Chairperson further asked the PTA to make available the required record and invoices of telecom companies to know the facts regarding the tax dispute.

Member Training FBR Shahid Hussain Asad, told the committee that waiver of taxes was drafted but it was never issued in the official gazette. He said that telecom companies had deposited Rs. 6.7 billion for the proposed waiver of taxes but the notification was never issued and hence tax-exemption was never made official.

Former DG LTU Islamabad and existing FBR Member IR Ijaz Hussain Shah reveled that telecom companies had approach tribunal for the waiver of FED on inter-connection charges, however, Tribunal had given its decision in the favor of LTU Islamabad by saying that tax on inter-connection charges won’t be waived.

DG LTU told committee that his team had communicated the tribunal’s decision to Mumtaz Haider Rizvi, then Chairman of FBR.

Later on, DG LTU informed the committee, Mumtaz Haider Rizvi, former chairman of FBR met with legal advisors of the telecom companies and somehow agreed to waive the tax if they submit their request letter to LTU.

Ijaz further revealed the committee that he had forwarded this letter to the FBR for necessary action. But, he alleged that he was pressurized on behalf of the former FBR chairman to comment in favor of allowing tax-waiver to telecom companies.

Ijaz Hussain Shah informed the committee that despite his strong opposition to proposed exemption, FBR officials did not consult him being DG LTU and reached a deal with telecommunication companies on the legal opinion of Sindh Revenue Board (SRB).

Ijaz said that All the telecom companies fall within the jurisdiction of the LTU Islamabad but LTU’s viewpoint was not taken in this regard.

Committee will carry forward the proceedings in next meeting, where PTA is likely to furnish records and invoices of telecom companies and former Chairman FBR will record his statement before the committee.

Via Business Recorder

  • so if all 5 companies are involved who is going to buy the 3G licence? I think gov. is just trying to make telcos sponsor them in the upcoming elections

  • Admin what u say. 3G kab tak aayga or konsi company launch karegi. Yar DSL etc ki speed to fail hai ab 3G se kuch umeed hai k mobile par net fast chale or ptcl etc se jaan chute.

  • This is a non-case, overdramatized by the media and politicians desperately looking for attention pre elections.

    The unpaid tax being referred to is sales tax on interconnect services but infact this tax amount has already been paid in the 19.5% charged to consumers (let this tax rate be t for the purposes below). This case is illustrated below:

    Company A is Cellular company that owes tax rate ‘t’ on its Final Revenue from cellular service ‘FA’ and Interconnect charges ‘IA’. Company B is the company that Company A interconnects with, therefore its only total revenue ‘FB’ is from Interconnect charges paid by company A; therefore FB = IA.

    Let Total Taxes Paid by Company A = TA
    Let Total Taxes Paid by Company B = TB
    Let Total Government Revenues = G
    (Therefore G = TA + TB – remember this)

    Case 1 (Present Day Situation): Company A pays NO tax on Interconnect charges, then it cannot claim these either. In this case, Company B pays no tax on interconnect revenues.

    In this case,
    TA = t*FA
    TB = t*FB = t*IA = 0(but t = 0, because no taxes paid on Interconnect charges)
    G = TA + TB [TOTAL government tax]
    G = tFA

    Case 2. If Company A *paid* tax on Interconnect charges, then it could deduct these from the tax on the sales to customers.
    That is,
    TA = t*FA – t*IA
    TB = t*IA
    G = TA + TB
    G = t*FA – t*IA + t*IA = t*FA (same as case 1 !)

    As you can notice, the TOTAL government taxes in both cases are the same. The only difference is that in Case 1, the mobile company A pays the entire sales tax for both companies, and in Case 2, both company A and company B pay small portion of the total tax owed whereas the TOTAL government taxes paid are the same.

    I am surprised that nobody can just bring this basic fact to light. It is basic arithmetic ladies and gentlemen.

    Lets get past these stupid issues and work to educate our people and on things such as technology transfer to Pakistan.

    What a joke really.

    • +1 and plz note tht the ppl at propakistani are like any other media outlet :) opinionated and ill informed so they keep referring to this as tax evasion without knowing the facts

  • bohat loot rahi hain companies. lagta hay inka zehan ban raha hay kay kharcha ho he na bus manafa ata jayay.

    waisay i hope 2 new 3G companies start their new networks in Pakistan.

  • Govt is just trying to make these companies frightful so they pay these dues before auction process gets started, as any international player cant take part in auction till june 2013 so it cant be just zong to get 3G license, ptcl is there but its barely possible that it may take part in auction, also it already provides evo services.

  • Well all telecom companies should bycott the auction if government can blackmail these companies then why cant these companies blackmail the government.!

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