Inter-connect charges: Mystery of Rs 47bn tax evasion solved
By: Sajid Chaudhry
ISLAMABAD: The mystery of Rs 47 billion tax evasion on inter-connect charges that whether it was due or not, has been resolved here on Tuesday when former Federal Board of Revenue (FBR) chairman Mumtaz Haider Rizvi admitted that this tax was due against mobile phone companies since 2005 and FBR failed to collect it.
The Sub-Committee of National Assembly’s Standing Committee on Ministry of Information Technology (MoIT) which met at the Parliament House with MNA Anusha Rehman in the chair was shocked and surprised when top officials of FBR including former chairman, former Inland Revenue member Shahid Hussain Assad, former FBR member Amin Raza Baqir and former income tax policy secretary Fahad Chaudhry said that they were not present in the meeting which decided to allow tax exemption of Rs 47 billion to mobile phone companies.
It also came to the notice of the sub-committee that none of the FBR officials admitted that they have provided the copy of draft notification to telecom companies, which was prepared earlier for allowing tax exemption on inter-connects charges.
The sub-committee was astonished to note that despite the clear judgement of tribunal against the telecom companies, the FBR still insisted and processed the SRO for granting waiver to companies under Section 65 of the Sales Tax Act 1990. Members of the committee raised question that why the former FBR chairman was ready to grant exemption to the cellular companies. Instead of processing the application of mobile phone operators, the FBR should go for recovery of the tax for the past years.
The sub-committee was also surprised when former FBR chairman said that the telecom companies have committed to deposit the sales tax of Rs 7-8 billion, but they have cheated and deposited advance income tax, which is adjustable.
The committee observed there might be angels who had taken this decision during meeting with chief executive officers of the mobile phone companies and said that it’s now up to the National Accountability Bureau (NAB) to investigate the involvement and role of the FBR officials who negotiated with companies and prepared disputed SRO for allowing exemption of tax on inter-connect charges to mobile phone companies.
The sub-committee finalised initial recommendations for submission in the main committee and directed FBR and Pakistan Telecommunication Authority (PTA) to jointly hold a meeting for ensuring availability of FBR officials sample invoices of inter-connect charges of the mobile phone companies and report back to committee by September 25, 2012. In case, PTA failed to provide assistance to FBR in this regard, FBR may use its powers for obtaining the required data and record from mobile phone companies to ascertain the volume of tax due and total volume of tax evasion committed by these companies since 2005.
The committee also observed that provinces are also the stakeholders in this case as this tax now comes in their jurisdiction and their representatives would be invited in the next meeting on September 25, 2012.
The sub-committee declared that tax on inter-connect charges was due against mobile phone companies from 2005, but FBR officials kept on sleeping and failed to collect and deposit billions of rupees tax in national kitty.
The sub-committee said that if the required records of the mobile phone companies was made available the tax on inter-connect charges evaded by the companies could have been Rs 147 billion to Rs 247 billion against the initial hypothetical figure of Rs 47 billion only which includes Rs 26 billion as due tax and Rs 21 billion as default surcharge.
Former Inland Revenue member admitted before the sub-committee that he was not involved in meetings with CEOs or tax consultants of the mobile companies; however, he had received the file for singing of the draft notification for allowing tax exemption from former FBR chairman. Similarly, on the directions of former chairman he cancelled the notification on July 3.
Present, FBR Chairman Ashad Ali Hakeem informed the sub-committee, while a smile on his face, that FBR has enough powers and ways to obtain required data and records from mobile phone companies. He assured the committee that FBR would hold a meeting with PTA chairman to ensure early availability of data so that he could be able to prepare and submit a detailed report on volume of tax charged from consumers and not deposited in the national kitty. He also informed that he had invited CEOs of these companies two weeks before so that this tax dispute could be settled amicably. “We want to determine audit mechanism for system audit so that in future tax collection is ensured,” he added.