Federal Board of Revenue, in its second notice sent to Telenor recently, has imposed a Rs. 20 million penalty for short deduction of withholding taxes from customers residing in FATA.
This penalty is in addition to Rs. 267 million withholding taxes that Telenor allegedly didn’t collect from customers based on operator’s earlier understanding with FBR and precedence of tax exclusion for people living in FATA.
FBR, however, states that Telenor should have deducted taxes from FATA and should have submitted the same to the government.
“We can confirm that Telenor didn’t collect taxes from FATA and we sent them a notice to explain the short-deduction”, said an FBR official in a senate standing committee meeting today.
Govt Demand for Telcos to Collect Taxes from FATA is Unconstitutional
“Since the taxpayer could not justify the non-deduction of tax, therefore an order has been recently passed as per the Income Tax Ordinance, 2001 creating a demand of Rs.287 million (including the default surcharge)”, said the FBR official.
Telenor, in response, has decided to contest the notice before “Commissioner Appeals”.
In an email communication with ProPakistani, Kamal Ahmed, Chief Corporate Affairs Officer, Telenor Pakistan said:
We disagreed with FBR’s first notice and responded with verifiable details of tax payments provided during the audit and requested the withdrawal of this notice. FBR has re-raised the same demand with additional surcharge, however we are contesting this demand before the Commissioner Appeals as we can confidently claim to have carried out all our statutory fiscal obligations.
It merits mentioning here that no operator — except one — deducts withholding tax from customers in FATA as the region doesn’t come under federal or any provincial jurisdiction and no taxes — neither federal or provincial — are applicable in FATA.
Telcos vs FBR: Will the Tax Records be Set Straight?
One operator that deducts taxes from FATA is mainly due to its technical limitation as its system doesn’t allow it to geographically exclude tax collection for certain regions.
Moreover, as a precedence, there’s a Peshawar High Court verdict that clearly states that no taxes are applicable in FATA.
It is expected that Telenor will go into litigation with FBR and the matter is going to be decided by the tribunal now.
Telenor says that it is committed to meeting all legal obligations and carrying out its operations in strict accordance with the laws of Pakistan while upholding the highest standards of corporate ethics and integrity.
It must be mentioned here that Telenor ranks as one of the highest taxpayer companies in the country. During the past 12 years, it has contributed over Rs. 275 billion to the national exchequer in the form of direct and indirect taxes.