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BR Research

Supreme Court and mobile taxes

Published Updated

That the Supreme Court has taken up on the subject of mobile taxes is a welcome move. But that it is also reportedly looking at all forms of taxes, including sales taxes and pricing at large, is perhaps not. There is no denying the sales tax needs to be reduced, but that is a matter of (bad) policy which lies in the domain of the legislature and the bureaucracy, and not the judiciary.

Be that as it may, the collection of WHT from tens of millions of telecom subscribers is something that the court is rightly investigating, and hopefully the WHT will be eventually booted out of the tax system – at least on telecom which is the backbone of future economic growth.

According to data by Pakistan Telecommunication Authority (PTA), number of telecom subscribers is about 150 million. And by government’s own estimates, published in Household Integrated Economic Surveys (HIES) conducted by Pakistan Bureau of Statistics (PBS), a wholesome majority of Pakistan’s population falls in the category that is not even stipulated to file income tax returns; not surely FY19 onward (where the floor has been raised to those who earn Rs100,000 a month) and not even for prior years when the minimum income to file tax returns was Rs400,000 per year.

The article 4 (c) of the constitution clearly says that “no person shall be compelled to do that which the law does not require him to do.” Yet, according to media reports, the Federal Board of Revenue (FBR) had the audacity to inform the court that a person has the right to claim refund if his or her annual liability is less than the tax withheld.

This statement is not only misleading in terms of the fact that millions of subscribers earn much less than what is required to file return. It is also misleading because if the government cannot pay those long pending and approved refunds of exporters, then what chances does the proverbial common man have for refunds.

Central to this problem, however, is the lack of data. To this date, this country doesn’t know the telecom consumption pattern across various income groups. The PBS would do well to make this a feature in its subsequent wave of HIES and other surveys.

In the meanwhile, the court could task a committee of telecom, taxation and economic experts to assess the amount of WHT collected by those subscribers who are not stipulated to file tax return. As Dr Ikramul Haq, the tax expert, noted in this newspaper earlier, that mobile companies are fully computerised and collect taxes on behalf of FBR. That data could be used to come up with a proxy for telecom spending across income quintiles ala the relationship grid between electricity units consumed and income level based on which the government allocates power subsidy.

Copyright Business Recorder, 2018

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