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Tuesday, May 21, 2024

Pakistan Moves to Block Non-Filers’ SIM Cards, Aims to Boost Tax Compliance

Pakistan's telecom operators and tax authorities collaborate to block SIM cards of non-filers, leveraging legal action and additional taxes to enforce income tax compliance.

In response to the Federal Board of Revenue’s (FBR) directive, telecom operators in Pakistan have begun the process of blocking SIM cards belonging to non-filers of income tax. The FBR announced that the operators have agreed to implement a manual blocking process in phases, starting with the first batch of 5,000 non-filers. This initiative aims to enforce tax regulations and enhance compliance among taxpayers.

The move follows a series of significant meetings between the FBR, Pakistan Telecommunication Authority (PTA), and telecom operators to ensure effective implementation of the Income Tax General Order. The FBR’s announcement on social media outlined the process, indicating that subsequent batches of non-filers will also face SIM card blocks. Additionally, telecom operators have started notifying non-filers about the impending SIM blocking through text messages.

Concerns Raised by GSM Association (GSMA) Addressed

The development comes shortly after the GSM Association (GSMA), representing global mobile network operators, expressed concerns over the FBR’s Income Tax General Order (ITGO). The GSMA had voiced apprehensions regarding the potential impact of blocking SIMs on non-filers. However, the FBR’s collaboration with stakeholders, including telecom operators, underscores a concerted effort to uphold tax regulations while minimizing disruption to mobile services.

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The FBR’s initiative targets over 500,000 SIM cards associated with non-filers. These SIMs will remain blocked until restored upon compliance with income tax regulations. The FBR’s strategy aligns with broader efforts to enhance tax revenue and promote fiscal discipline.

Legal Implications and Additional Tax Measures

Despite initial opposition from the PTA and telecom companies regarding SIM blocking, the FBR has decided to pursue legal action if the SIMs of non-filers are not blocked by May 15, 2024. The FBR plans to file a petition with the Islamabad High Court against the PTA and telecom companies for non-compliance with the Income Tax Ordinance.

To further incentivize tax compliance, the FBR intends to impose an additional 2.5% withholding tax on mobile phone usage by non-filers. Moreover, there are discussions about levying additional taxes on mobile recharges and data top-ups. These measures aim to encourage tax registration and compliance within the telecom sector.

The FBR’s proactive approach underscores a commitment to strengthening tax compliance and governance in Pakistan. By leveraging partnerships with telecom operators and regulatory bodies, the FBR aims to foster a culture of tax responsibility while harnessing digital platforms for revenue generation and economic growth.