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CJP questions the illegal high taxes on mobile users

The CJP inquired how 140 million cellular consumers can be charged taxes, [when they may not even be part of the tax base].

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News Analysis |

The Supreme Court of Pakistan has directed the Federal Government, the Federal Board of Revenue (FBR) and all the provinces to submit a written response, in one week, over the high taxes charged by cellular operators in the country.

Chief Justice of Pakistan headed the three-member bench, which had taken the suo moto of the issue. On May 03, CJP Mian Saqib Nisar took suo moto control over the matter and issued a notice of tax deduction on mobile phone balance by the mobile phone operators. During the hearing of the DTH Licence case –  five-member bench headed by the Chief Justice – the report was sought from the Attorney General, Ashtar Ausfar. Moreover, notices were issued to all cellular operators in the country, who were also asked to submit their reply by Tuesday [Today]. The Supreme Court had also summoned the representatives of the Pakistan Telecommunication Authority (PTA).

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In today’s hearing, CJP enquired, “What taxes are deducted when we recharge our mobile phones? The public deserves to know about that. Why are Rs40 deducted from the Rs100 mobile phone card?” Further to this, the Attorney General, Ausaf informed the Apex Court that the mobile phone companies are charging;

  • 5 % sales tax,
  • 10 % service charges and
  • 5 % withholding tax (WHT)

The CJP showed displeasure and said that it was unfair to the masses who don’t pay taxes are subject to 12.5 % WHT.

In regard to this, Justice Ejaz ul Ahsan said that 42% tax is deducted from recharge without making a call.

The narrow tax base has been a major problem for Pakistan. Here, only 1.26 million people file their annual income tax returns. In the case of mobile operators, masses are being taxed, who receive a non-filers pay, and therefore they do not file returns.

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They CJP inquired how 140 million cellular consumers can be charged taxes, [when they may not even be part of the tax base]. “The court is enquiring about the law under which the withholding tax is charged. The law of withholding tax seems imperfect. Aren’t these taxes exploiting the people?” CJP remarked.

Since it is apparently an illegal way of charging money, the court has asked for a comparison of card rates with other countries. The Supreme Court has called upon the newly induced Finance Minister, Mifta Ismail, for a month. He is to present himself before the court and explain what laws deem it appropriate for the masses to be subjected to such taxes.

A mobile phone company counsel explained that 17 % tax is charged in federal areas and 19 % in provinces. The 144 million mobile phone users have been complaining about such large chunk of the balance being deducted every time when one charges mobile cards.

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The PTA has admitted this in their annual report, stating that WHT of 12.5% is high and mobile users fall below the threshold of being taxpayers, and cannot be repaid the adjusted amount in their annual tax returns. With this in mind, the WHT of 14% was charged in the fiscal year 2016-17. When PML-N took charge in 2013, it increased the WHT to 15% from 10%. Though, it was reduced to 14%, in the subsequent year. In the federal budget 2017-18, it was brought down to 12.5%. Telecom companies in Pakistan pay one of the highest taxes in the world, which it passed on to customers, making it unaffordable for the cellular users.

The telecom sector accuses the government of charging heavy taxes and term the heavy taxation as the biggest challenge to do business in Pakistan. Mifta Ismail has to answer to the court for the heavy taxation which CJP claims to be illegal.


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