Multi-billion rupee tax scam: Not everyone is telling the truth, says PTA chief

Body formed to probe attempt to give tax relief to telecom firms.

ISLAMABAD: As a parliamentary panel constitutes a committee to probe whether there is any reality in giving Rs47 billion tax relief to telecom companies, the Pakistan Telecommunication Authority (PTA) chairman has said that the companies’ stance that the whole issue was mere ‘procedural irritant is incorrect’.

In a testimony to the National Assembly Standing Committee on Information Technology here on Tuesday, newly appointed PTA Chairman Farooq Awan said everybody was not saying everything true in the scam. He said even within the Federal Board of Revenue (FBR) there was dispute over granting the relief to the five telecom operators.

Headed by Chaudhry Barjees Tahir, the NA panel’s session had been convened to determine whether there was any reality in the National Accountability Bureau’s claim that it had stopped the FBR from giving the illegal tax concession while the companies claimed ‘innocence’. The concession was on account of sales tax on interconnect charges.

After blocking the move, NAB placed three FBR officials on the Exit Control List (ECL) including former chairman Mumtaz Haider Rizvi. Both the FBR and telecom companies insist that there was no loss to the exchequer as the collection would have to be refunded at the end of the day.

Awan said the FBR charges sales tax in the federal excise duty mode under the value-added tax (VAT) system, but there are no defined rules of VAT in the country. He suggested that there was a need to resolve the matter at the earliest and there should be a win-win situation for all the parties concerned.

He, however, was of the view that there was a need to look into why the FBR first issued a notification to waive the tax and then withdrew the notification on July 2. Awan made it clear that the PTA did never say that the companies had not evaded taxes.

Speaking for the first time since NAB unearthed the scam, sales tax chief Abdul Sattar Aora said, “interconnect charges were taxable but the mobile companies had not been paying the tax since 2007.”

However, Aora, whose name is also on the ECL, contended that the tax on interconnect charges was adjustable, thus, it would not cause an increase in state revenues. He said NAB’s claim that it had saved Rs47 billion in potential losses was untrue.

Aora pointed out that the matter of tax dodging on interconnect charges came to the FBR’s notice in 2010 and it issued show-cause notices to Mobilink and PTCL and audited their accounts. On the basis of the audit, the FBR demanded Rs2.2 billion from Mobilink and recovered the amount in June 2012 by freezing the company’s bank accounts.

He said the companies kept on negotiating with the FBR and eventually agreed to pay Rs6.7 billion in June this year. After that, the FBR decided to issue a notification waiving the remaining tax.

FBR’s Member Inland Revenue Shahid Hussain Asad said the FBR headquarters waived the tax on the advice of the director general of Large Taxpayer Unit Islamabad and withdrew the notification after the LTU DG issued another letter in which he opposed the tax concession.

“Members of the committee are of the view that the FBR wanted to take kickbacks, that was why it created this whole drama,” observed committee Chairman Chaudhry Barjees Tahir.

He said the committee had also reservations about the FBR’s decision to issue show-cause notices to only two companies in 2010 while no company was paying the tax.

The panel constituted a sub-committee, headed by Anusha Rehman of the PML-N with a mandate to find out the FBR officials who staged what it called a drama for vested interests. The sub-committee will also determine why only two companies were targeted and who sealed the office of Mobilink.

Published in The Express Tribune, August 8^th, 2012.