Here’s How Government Extorts Businesses Under the Guise of ‘Taxes’ and ‘Fees’

by Wahaj us Siraj

The government needs taxes to deliver services to its citizens. While doing so, the easiest prey are businesses because they regularly file returns, are compliant and can be more wrested in the tax net.

Broadening the tax net is difficult for taxmen and an easy method is always preferred as if they don’t get paid to do hard things. Whenever the government needs more money, the genius solution is to slap additional duties and taxes on those who’re already paying.

The same approach is applied while charging regulatory fees. Legally, fee is not tax and charged in lieu of certain services provided by the regulators and authorities like licensing rights, facilitation, etc., and have to commensurate with the costs of services provided by the authority.

The general remarks of government officials in meetings with businesses are “you’re making too much money” as if the government has provided the seed funding. Days of monopolies for private businesses, except for a few powerful government-owned monopolies, are over. Markets are volatile and hypercompetitive. Customers are the best judges in buying a product or service at a certain price.

Of course, businesses have to make money and profits otherwise they can’t exist. Businesses, particularly structured corporates, are engines of growth for any economy. They bring competitiveness, innovation, new technology, and most importantly create jobs for educated youth, something our country direly needs.

The telecom sector, with the highest tax rates up to 40% in the world, is no exception to the worst treatment often faced by businesses at the hands of the government. On top of this, the operators are charged exorbitant right of way (ROW) costs, regulatory fees, etc., disgraced and treated like dirt by arrogant officials.

Humiliation and dishonor of Jazz by the taxmen has brought widespread shame to government officials. One of the largest Pakistani taxpayers never deserved this treatment – taxmen sealed their head office in presence of police, made videos and posted on social media as if they had caught the biggest tax fraud of the century.

It’s a controversial order as Issue 3 of 4 in 22 pages order dated 22.09.2020 of Appellate Tribunal Inland Revenue, FBR relates to “Industrial Undertakings”.

The telecom industry has been raising this issue on various platforms including the Prime Minister’s Task Force on IT & Telecom for quite some time.

It’s a misconception that “Jazz defaulted and hence the FBR is right in their action for the common good”. Telecom was declared as an “industry” in 2004 by the Federal Cabinet and since then, FBR hasn’t included telecom in Section 2(29C) of Income Tax Ordinance, 2001 despite numerous official letters written by the Ministry of IT & Telecom.

FBR says that only the conventional industry, with material input and output, is “industry”. High tech data and telecom has nothing to do with industry and hence operators cannot adjust income tax paid at the time of imports of plant and machinery, the board claims. When FBR doesn’t value the decision of the Federal Cabinet declaring Telecome as an industry after 16 years of reminders, then what’s the purpose of such a declaration?

The rigid and ignorant mindset rampantly prevails in officials as they think that any due right given to businesses under the law undermines government interests. FBR needs to justify more than Rs. 50 billion annual taxes collected from people’s pockets in name of “12.5% Advance Tax” on internet and telecom, which can never be adjusted by more than 90% of consumers as their annual income doesn’t exceed taxable limits.

Isn’t it a day-light robbery of millions of consumers? On the other hand, you can just drive to Dir, Malakand, Swat, Chitral, Kohistan, Gilgit Baltistan, etc., and see identical “NCP – Non-Custom Paid” number plates of 95% vehicles as if they were operating in no man’s land.

You can also walk into the wholesale markets of big cities flooded with smuggled goods. Who lets the smuggled goods into the country? Are our borders not protected by Customs? Why is FBR consistently shy to take action against these smugglers and tax evaders? Why do we keep slaughtering goose which lays golden eggs instead of producing more gooses?

Educated youngsters need high-quality and meaningful jobs in Pakistan which can only be provided by modern businesses. It’s time for the government to purge the colonial mindset. Regulators need to become real facilitators as required by the law instead of acting as cops and screwdrivers only to collect “bhatta” at their whims.

Taxes and fees have to be brought down and stone age regulations be modernized. This is a real change that Pakistan is looking forward to from the current government.

About the Author

The writer is Co-founder and CEO of Nayatel and a member of the Prime Minister’s Task Force on IT & Telecom.


    • we voted to get change i dont know with this system will change but it should change soon
      other wise people have to take matters in there own hand

  • It takes two hands to clap. If you claim that Govt is milking your market segments in terms of taxes, than isnt your segment doing the same with graduates and people working under you?

  • Baki dunya: pay taxes even council tax
    Pakistan: Business se tax lena ghalat he income ya councile to door ki baat he

    • Beta baki duniya phir us tax k badle jo services provide krti hai bnda khushi khushi tax de…. Hamare mulk mai koi aik aisi service bata do jo government deti hai tax collection k badle.. Koi aik?

      • Roads. Trains. They even keep PIA alive.
        Some hospitals.
        Public schools. But we should visit them to check if they are working well.

  • Those who have no experience of Pakistani regulating industries can not understand the core point.
    Modern businesses like internet companies and digital services providers will face a rock wall when trying to register in Pakistan. You can have a mason’s or cobbler’s or a barber’s registration from SECP and FBR but you can not register your digital business. They will give you such a stupid look and answer that you will be perplexed.
    ‘Freelance?’, ‘Online tuition services?’, what is that? Ye to koi business nahin hey.
    It is just a pity on our system. We are not going to catch up with the world like this.

    • Abdul, I hear your pain. Nothing better can become of this country. It’s going downward day by day. Already at par with African countries on many indicators.

  • Jo Company Kama Rahi hai Aur TAX Na De License He Cancle Kar Do Bolo

    Pehli Fursat Main Nikal

  • At the end of the day neither the companies or the government suffers anything, it’s the consumer who pays the extra burden of taxes. So stop this self pity and get over it as if you care for the customer!

  • Can someone tell us how many local servers of Google, Microsoft, Yahoo, akamai, CloudFlare or other CDNs these local ISP have? I mean they also do not want to invest locally and send all profits abroad.

    • Abeh genius, these “local” servers of Google Akamai CloudFlare etc are provided and paid for by companies who provide them not local ISPs. Why don’t you bother to find out before commenting publicly. You just make yourself look bad. Thank God you didn’t reveal your name otherwise you’d be the laughing stock.

      • These are hosted by ISPs to reduce their external data traffic. They save them money. Most ISPs in the west have CDNs on their network.


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