ISLAMABAD: Cellphone usage is comparatively cheaper in Pakistan than in several other countries, the Federal Bureau of Revenue (FBR) told the Supreme Court on Saturday.
A three-judge bench of the top court, headed by Chief Justice Mian Saqib Nisar, had ordered federal and provincial governments and the FBR on May 8 to respond why so many taxes were being deducted on pre-paid scratch cards.
In response to the SC’s order in a suo motu case, the FBR submitted that a comparative study showed that the quantum of such taxes was lower in Pakistan’s telecom sector than in Bangladesh, Malaysia, Thailand, Indonesia and Turkey.
A number of countries, the FBR contended, also collected various other fees, contributions, charges and levies.
Withholding tax constituted a major chunk of direct taxes, 68 to 70%, collected during fiscal year 2016-17, it told the court, adding that the amount thus collected was Rs944 billion, out of total direct taxes of Rs1,393 billion.
According to the FBR, cell phone companies pay between Rs4 and 4.5 billion every month. Overall withholding tax collected under Section 236 of the Ordinance was over Rs51 billion for fiscal year 2016-17, or 5.5% of overall withholding tax collection in the same year.
The FBR submitted that being conscious of the problems faced by mobile phone users, applicable taxes had been reduced from a peak of 15% in 2013-14 to 12.5%. The applicable FED rate had also been reduced to 17% in the current fiscal year, it added.
Lack of documentation of economic transactions in developing economies was the main reason why the tax base and revenue collection was low, according to the FBR.
The collection of tax at source was also enforced on certain expenses or transactions with high informational or mapping value, it stated, adding that in such cases, withholding tax data could be used as a source for broadening the tax base and revenue generation.
The FBR contended that adjustable advance withholding tax was treated as a payment on account of recipient’s annual tax liability. All individual taxpayers had the right to claim refunds if their annual tax liability was less than the withholding tax already paid, it added.
“Income tax is withheld… collected only once from customers at the time of sale of prepaid card/easy load at the rate of 12.5 per cent as per section 236 of the Income Tax Ordinance 2001. This tax is Advance Income Tax, credit of the tax collected can be claimed by the customers at the time of filing of Income Tax Returns,” the FBR submitted.
It pointed out that a matter of similar nature was challenged and adjudicated in favour of the revenue department by the apex court.