FBR fails to collect FED on interconnection charges: NA panel

SOHAIL SARFRAZ

ISLAMABAD: The sub-committee of the National Assembly Standing Committee on Information Technology (IT) on Tuesday categorically declared that it is gross negligence of the Federal Board of Revenue (FBR) as it failed to collect Federal Excise Duty on interconnection charges by telecom operators.

The sub-committee headed by Mrs Anusha Rehman Khan Advocate patiently heard the viewpoint FBR Chairman Ali Arshad Hakim, former FBR Chairman Mumtaz Haider Rizvi, FBR Member Training Shahid Hussain Asad, FBR Member Inland Revenue (North) Ijaz Hussain Shah, former FBR Member Admin Raza Baqir and finalized its recommendations for the National Assembly Standing committee on IT.

After hearing conflicting statements of former Chairman FBR and existing FBR Member IR North, she made it clear that the NAB should investigate the scam and the bureau should itself fix responsibility on the officials involved in tax evasion scam.

Sub-Committee of National Assembly Standing Committee on IT finalized initial recommendations for submission to the main committee and directed FBR and PTA to jointly hold meeting for ensuring availability of FBR officials sample invoices of interconnect 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’ enforcement powers for obtaining the required data and record from mobile phone companies to ascertain the volume of tax due and total volume of tax evaded by these companies since 2005.

It recommended that the FBR failed to collect the FED on interconnection charges since 2005. Due to negligence of the tax authorities in the past, the levy was not collected from the telecom companies.

The committee recommended that the FBR has signed a notification which granted exemption of FED on interconnection charges under section 65 of the Sales Tax Act 1990. Later, the FBR did not issue the SRO for publication in the official gazette. However, nobody is ready to take responsibility that under whose authority the notification was drafted for granting exemption under section 65 of the Sales Tax Act 1990.

Anusha Rehman stated that the National Accountability Bureau would conduct inquiry in the scam and would ascertain the authority which ordered issuance of the notification to grant exemption of the FED on the interconnection charges.

The sub-committee reached the conclusion that the allegation of Rs 47 billion tax evasion is merely a hypothetical figure. As per FBR Member Inland Revenue (North) the figure could be Rs 147-2047 billion, depending on the availability of data including invoices from the telecom companies. On the other hand, the figure could be less than Rs 47 billion. However, one thing is confirmed that the figure of Rs 47 billion is not authentic. The actual figure would be ascertained on the basis of the relevant data including invoices from the telecom companies. 

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 which includes Rs.26 billion as due tax and Rs.21 billion as default surcharge.   

She recommended that the issue involving billions of rupees must be resolved on top priority basis without any further delay. If there was no FED on the interconnection charges, then why the telecom operators have made request to the FBR for waiver under section 65 of the Sales Tax Act 1990. This means that there was FED on the interconnection charges, otherwise, the telecom companies have not made presentations or applications before the Board for exemption.

Anusha Rehman stated that there is a difference between the written documents available with the committee and verbal statements of FBR former Chairman Mumtaz Haider Rizvi on the issue, which has created confusion.

The sub-committee observed there might be the angles who had taken this decision during meeting with CEO’s of the mobile phone companies and said that it’s now up to 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 directed the FBR Chairman to convene meetings with the Chairman Pakistan Telecom Authority (PTA) for accessing required documents from the telecom companies. The PTA should fully cooperate with the FBR for providing the necessary documents to the tax authorities. The role of the independent regulator like PTA is very important for acquiring documents from the telecom companies. If the PTA is unable to obtain the information, the FBR can directly take strict measures admissible under the law for recovery of the requisite documents.

FBR Member Inland Revenue (North) Ijaz Hussain Shah informed the committee that the tax department had requested the PTA for obtaining necessary record of the telecom companies, but the Authority has never cooperated with the tax authorities. The Large Taxpayer Unit (LTU) Islamabad has taken audited reports of the mobile companies directly from these units. However, the same have not been provided by the PTA.

She added that the provinces will also be invited in the next meeting of the sub-committee to hear their viewpoint on the issue.

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.   

Committee also observed that mobile companies have been charging tax inter-connect charges and passing on the subscribers according to available record, against the FBR official claim that this tax was not charged by any company since 2005.    Sub-Committee also included in its’ initial recommendations that those mobile phone companies that would be found defaulter of tax inter-connect charges even of a single rupee should be disqualified for participation in bidding of the 3-G and 4-G licenses.