Telecom operators approach SIFC for relief in proposed fines

LAHORE: The Telecom Operators Association approached the Special Investment Facilitation Council (SIFC) for the abolishment of proposed fines under Section 114-B and Section 236 in Finance Bill 2024-25 for the Telecom Sector which proposed penalization of the telecom sector under Income Tax General Orders (ITGO), and collection of 75% Advance Tax on Mobile Services for Non-Compliant Tax Filers.

In a letter to the National Coordinator SIFC, Lt General Sarfraz Ahmed, the Association also described the inability of the telecom sector to collect 75% Advance Tax on Mobile Services for Non-Compliant Tax Filers and requested the abolition of it.

The telecom sector has expressed concerns to relevant government authorities, including the finance minister and chairman of the Federal Board of Revenue. In a recent Senate Standing Committee on Finance meeting, they raised objections to proposed tax measures in the 2024-25 federal budget that could greatly impact their industry.

‘We wish to emphasize through SIFC once again the regressive nature of punitive actions proposed against telecom operators (foreign investment-based entities), impracticality and systemic limitations faced by telecom operators’, the association pleaded in the letter.

On abolishment of unwarranted penalization of the telecom sector under Income Tax General Orders (ITGO), the association stated, ‘The proposed fines of Rs 100 million and Rs 200 million (every fortnight) concerning ITGO implementation by the Telecom Sector for the Tax non-filers is discriminatory and unjust. Using the corporate sector for ITGO enforcement and in case of even minor lapse, such huge fines for no direct fault of the Telecom Sector is uncalled for and deters foreign investment’. It is important to note that the Senate Standing Committee on Finance also endorsed the Telecom Operators’ demand of withdrawal of the proposed amendment in IGTO in its meeting held on June 20, 2024.

About the proposed 75% Advance Tax Collection on Mobile Services for Non-Compliant Tax Filers, the operators stated that ‘As conveyed in the Senate Standing Committee meeting also, our systems cannot currently distinguish between compliant and non-compliant tax filers for withholding tax purposes. With over 180 million subscribers (of the Telecom Sector), implementing such amendments at this juncture is operationally unfeasible and impractical.

The Telecom Operators Association lauded the cooperation of the Federal Minister for Finance and Chairman FBR on this matter and assured the industry’s commitment to assisting the FBR in achieving its goals wherever possible. Despite the constraints of existing systems and legal regulations, the industry has successfully implemented a phase-wise batch-based approach.

The industry believed that the proposed measures in the Fiscal Bill 2024 are unwarranted and urged for the immediate withdrawal of these proposed amendments from the Finance Bill 2024-25 for time constraints.

The industry official mentioned that all essential services including the Banking sector, ATMs, Credit Cards, E-commerce, Passport Control, Security Institutions, National Database, E-commerce, and Digital applications are connected and governed through the Internet bandwidth and services provided by Telecom Companies.

The imposition of a sales tax of 18% on handsets below $500 and 25% on more than $500 will impede broadband penetration and digitalization in Pakistan. Affordable mobile handsets are crucial for increasing digital access, especially in a country where mobile phones are the primary means of accessing the internet for the majority of the population.