Senate body shows concern over hefty taxes on telecom sector

ISLAMABAD: A legislative body of Senate on Monday expressed concern over collection of taxes by provinces on telecom sector, which according to it was not a devolved subject. The body also expressed serious concerns over heavy taxation on telecom sector and urged for rationalising it.

Senate Standing Committee on Information Technology and Telecom held its meeting in Parliament House on Monday, which was chaired by Senator Shahi Syed. State Minister for Information Technology Anusha Rehman also expressed annoyance over provinces’ interference and collection of taxes on telecom sector. Expressing its concerns over the taxation measures, the committee decided for legal interpretation and sought legal help to resolve the matter.

Briefing the committee on tax deduction/collection on phone cards, easy-load from cellular companies, the Federal Board of Revenue (FBR) confirmed that it has no mechanism and capacity in place to monitor cellular companies’ traffic and real time access to ensure that tax deducted from customers were transparently deposited. The board has randomly conducted audit of some telecom companies, but it requires forensic audit and needs technical expertise to ensure 100 percent transparency it currently lacking, said FBR official.

In order to examine the authenticity of sales declared and taxes deducted, the Large Taxpayers Unit, Islamabad in collaboration with Pakistan Telecommunication Authority (PTA) have arranged a series of meetings with all telecom companies. Based on the interactive sessions, report has been prepared which encompasses technical processes involved and describes mechanism and amount of taxes collected on administering of various voice and data services by the telecom companies. Officials said that terms of references for forensic audit have been finalized, and expecting to establish technical system within two to three months.

The committee also expressed concerns over heavy taxation on telecom sector and urged for rationalising it. State Minister for IT Anusha Rehman said that a package is being under preparation to be shared with Finance Ministry to rationalise taxes on the sector. She expressed concerns that telecom/IT is federal subject and not devolved to provinces, but they are imposing and collecting taxes.

The minister said that tax on broadband services were raised with provincial governments and urged them to withdraw. Accepting their demand, the Punjab government has withdrawn taxes on broadband services.

Senator Rehman Malik asked the government to declare tax-free zone for the IT sector to ensure growth in the sector. He recommended the government to reduce tax from Rs 37 to Rs 25 on mobile cards in upcoming policy as it is extra burden on people. The IT minister backed the proposal saying that the issue has already been raised with the Finance Ministry.

Anusha said that the IT sector is enjoying tax holiday status from 2000 till 2016. She said that telecom sector registered 46 percent growth during last two years as the number of registered companies increased from 300 to 1100. According to the State Bank of Pakistan, telecom sector exports is $370 million, however, according to the Pakistan Software Export Board (PSEB) study it is around $2.8 billion, as many companies do not bring their total remittances in the country due to flaws in policies, she highlighted.

The government has given the target to increase IT exports to $500 million by 2018, said the minister adding that Pakistan is ranked at number four in the world after US, UK and Ukraine with respective to e-lancing. Currently, 75,000 people are involved in the e-lancing and export software, however, the data is not being recorded. She said that the SBP has issued policy directives with IT ministry recommendation to introduce six-digit code to ensure transparency in export data.

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