FBR has come up with a new measure to collect/deduct tax from telcos with the help of provincial tax collecting machinery. According to an order issued by Federal Tax Ombudsman Abdur Rauf Chaudhary, an automated system will be put in place for monitoring such transactions from telcos for tax purposes.
This whole measure was prompted by a complaint filed against a telco, especially when concerns were raised over tax evasion tactics on part of the telecom company. FBR, prior to the complaint, did not have any software or system in place to calculate and monitor the deduction of taxes from cellular companies. Its inefficiency and apathy was on full display in such cases. There was an urgent need to address cases like these hence the FTO order came.
FBR is currently ill-equipped to deal with tax evasion cases from telcos
It is the need of the hour for FBR to establish an effective automated system. By revisiting some rules and procedures with provincial revenue authorities, and by also calling for some suitable changes in laws that deal with tax collection, FBR needs to collaborate with PTA, State Bank and other stakeholders (like the telcos) to roll out a hassle-free tax collection system. The FTO has passed an order in this regard on Monday, directing the FBR to take the necessary steps within 90 days.
As things stand, there has been a significant leakage of government revenue in these cases, thanks to the legal loopholes and the inefficient monitoring of receipts by FBR in cases related to the Telecom Sector. An exercise of jurisdiction as covered under Section 9(1) of the FTO Ordinance 2000 is needed, according to the FTO order.
An automated taxation system is to be setup within 90 days in collaboration with PTA, State Bank and telcos
To date, many hearings were held by issuing notices to telcos, PTA and FBR. The objective of these hearings being to sort out the tax evasion cases. It is only because of these meetings that it was ascertained that there was no automated system in place, one that calculates and monitors the amount of tax on account of income tax and sales tax/FED that’s deposited in the treasury. After the passage of the 18th Amendment, tax collection became a provincial subject, hence the need for provincial tax authorities to work in this case.
It is hoped that FBR and the telecom companies reach an understanding in this matter and settle on a tax collection mechanism that works to the satisfaction of all. Doing so will ensure increased transparency in tax collection in the future.