The Federal Board of Revenue (FBR) has decided to conduct forensic audit of the cellular companies to scrutinise tax collection and financial statements submitted by them. The government has not approved GSM development project of the Special Communication Organisation (SCO) for AJK and Gilgit-Baltistan and mobile system may come to a standstill in these areas anytime soon.
This was revealed in the Senate Standing Committee on Information Technology and Telecommunication which met here with Shahi Syed in the chair on Thursday. Pakistan Telecommunication Authority (PTA) officials while briefing the committee said that annual cellular mobile revenue during 2013-14 was Rs 322.7 billion which is 70 percent of the total telecom revenues (Rs 465.5 billion).
However, the parliamentarians raised questions over the PTA's ability to ensure transparency in tax collection by asking: Who would verify that cellular companies deposited the exact amount? A PTA official said that it is the jurisdiction of the FBR to ensure transparency in tax collection and the FBR is going to conduct a forensic audit in this regard. The spectrum auction for NGMS services generated total revenue of $1.224 billion to the national exchequer including advance tax at l0% of the total auction winning price amounting to $1.11 billion.
Mobile Network operators have already paid $965.3 million in the Federal consolidated fund and $111.3 million (10 percent of $1.112 billion) to FBR, and the remaining amount of $147.5 million plus mark up will be paid by the operators within next five years. In terms of taxes, mobile network operators have contributed Rs 474.6 billion to the national exchequer during the last five years.
Overall cellular mobile sector taxes and levies in Pakistan are approaching 40 percent, which is one of the highest effective tax rates in the world, they added. The Ministry officials informed that government may form a regulatory body to regulate IT Companies in the country. Initially, there is a need to study leading IT export-oriented countries such as India, Philippines, Malaysia, Egypt and Ireland to determine the level of regulations on IT industry and nature of established regulatory body, if any. The Ministry may consider restructuring and empowering PSEB to become the regulator of Pakistan's IT sector, like PTA is a regulator of telecommunications sector, but at the same time continue with the its rule of facilitation and export promotion of IT industry. This would require changing legal structure of PSEB which is currently a SECP registered Guarantee Limited Company under the Companies Ordinance 1984 with its own Board of Directors.
Due to IT sector's importance in earning valuable foreign exchange for the country and IT industry still being in infancy stage as compared to other industries, the government has declared IT export income to be tax exempt until June 30, 2016. In order to ensure growth of IT exports beyond $1 billion and to establish IT sector of Pakistan on equivalent footings as other comparable countries, it is important to consider extension of export income tax exemption for IT industry until 2026 and to provide appropriate concessions in federal and provincial taxes to motivate investors to invest in IT industry locally instead of shifting their IT business to a more tax-friendly country.
The SCO officials maintained that cellular companies only go the areas where there is revenue and not operating in the areas where security threats are exist. They urged the parliamentary panel to recommend the government allow them to operate in FATA, where other cellular companies are avoiding operating due to security concerns. The committee recommended allowing SCO to operate in FATA and tribal areas.
Parliamentarians also raised questions over un-audit of mobile cards, tax deposits and expressed serious reservations over extra charges by some cellular companies for reducing minute duration from 60 seconds to 45 seconds. Member PTA assured the committee that inquiry would be conducted into the matters. The committee directed FBR officials to attend next meeting and appraised it of the method of tax collection, verification etc. The committee also raised concerns over the privatisation of the PTCL and directed the President PTCL and Privatization Commission officials to attend next meeting and present agreement copy in the next meeting to expose people behind faulty agreement. The committee also expressed concerns over 40 thousands pensioners including 10 thousands widows PTCL affectees. The committee was informed that until 2010, the pension increases announced by the federal government were adopted by PTET (agreed by PTCL management) without any modification.
However, the federal government announced an unusual increase in pension in 2010 (@20%) which was not applied by PTET to all the pensioners keeping in view its huge financial implications for PTCL. The pensioners who had retired prior to 01.01.1996 were allowed the same rate of increase in pension as announced by the government whereas the pensioners who retired after 01.01.1996 were allowed increase in pension on the basis of actuarial evaluations (@8%).
Aggrieved pensioners retiring after 01.01.1996 filed cases against PTCL, PTET and the federal government/Ministry of IT in different High Courts. Under Rule 7 (4) of PUT Rules, 2012, the Board of Trustees was empowered to allow increase in pension at such rates as it may deem fit. Nevertheless, the cases from Islamabad High Court and Peshawar High Court were decided in favour of the pensioners directing PTET to pay pension at the rates announced by the government to all the pensioners who were initially employed by T & T Department.
PTCL and PTET filed CPLAs against these judgments in the Supreme Court, which after hearing detailed arguments has dismissed the petitions vide a consolidated judgment dated 12.06.2015. In view of massive impact for the government shareholding in PTCL as well as the strategic importance of PTCL's financial viability, PTCL has also requested federal government, being the shareholder of PTCL to join PTCL by filing a review petition in the Supreme Court of Pakistan. As the matter has financial implications as well, MolT has sought advice of Finance Division and Prime Minister on the instant matter. However the committee recommended the government not to go into the review petition in the Supreme Court about its decisions pertaining to pensioners.
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