Telecom companies adjusted only Rs 5.9 billion as minimum tax /alternate corporate tax for the Tax Year 2015, revealed the Finance Ministry.
The Ministry affirmed that telecommunication sector is one of the highest tax collecting sectors in terms of Withholding Taxes and has paid Rs 43.082 billion in withholding taxes for the Tax Year 2015.
However, as far as the sector’s own taxes are concerned, telecom companies are declaring losses in their Income tax returns and are paying minimum tax / alternate corporate tax only. Therefore these companies, in their own capacity, cannot be termed as highest taxpayers. For the Tax Year 2015 Minimum tax /alternate corporate tax paid or adjusted by different telecom companies is Rs. 5,994 million.
Sales Tax on telecom services is collected by the Provincial Revenue Authorities in respective provinces whereas Federal Excise Duty is leviable thereon only in Islamabad Capital Territory (ICT).
Further, sales tax on supply of SIMs is also collected from telecom companies.
Following is the collection for the Tax Year 2015 with Sales Tax & FED at Rs. 2,775 million.
Breakdown of Taxes, Fees, Duties and Levies:
- Minimum Tax (Income Tax): 1 % of turnover
- Withholding Tax (Income Tax): 14 %
- FED on Telecom Services: 18.5 %
- Sales Tax on Supply of Sim: Rs. 250 per Sim
The Ministry further stated that double taxation is not being collected or charged by cellular mobile companies:
- At the time of recharge, all telecommunication companies are charging withholding Income Tax @ 14% on both post-paid and prepaid services u/s 236 of the Income Tax Ordinance, 2001. The withholding tax so discharged is adjustable/Refundable against the income tax due from the consumer.
- Federal Excise Duty @ 18.5 % on telecommunication services is also collected by telecom companies. This FED @ 18.5% is deducted/charged against the balance amount on card for each transaction as noted below:
- 10 % service charges deducted at the time of feeding of scratch card.
- On call charges when a call is made from Islamabad capital territory.
- There is no double taxation in the aforesaid arrangement since income tax which is a tax on income is refundable/adjustable and FED is a tax on consumption.
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Waisay Bhi Market Main 30 Rupee Se Kam Load Hota Nahi
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Direct tax payments (as opposed to tax collections as withholding agents) reflect the profitability of a sector. The above only means that telecom is not doing good. Not to mention, it is a capital intensive industry, with heavy taxes, license fees and other local charges. Add to that the price war resulting from fierce competition to stop customer churn, and you see why hardly any telco is making profit. No profit, no tax. Simple!