Mobile phone card tax suspension could cause Rs123 billion loss to national exchequer2 min read

Before the apex court decision, provinces were collecting around 19.5 percent tax on a prepaid phone card, so their revenue collection losses would touch Rs75 billion annually

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ISLAMABAD: The apex court’s decision on Monday of suspending taxes on mobile phone cards is set to cost the national exchequer a revenue loss of Rs123 billion at the federal and provincial level.Out of this, Rs75 billion revenue loss will be borne by provincial government and Rs48 billion by the Federal Board of Revenue (FBR), reported The News.

The tax regulator will be booking a loss of Rs4 billion revenue monthly with the current rate of 12.5 percent tax deducted on a prepaid phone card, which equates to a Rs48 billion yearly loss.

Before the apex court decision, provinces were collecting around 19.5 percent tax on a prepaid phone card, so their revenue collection losses would touch Rs75 billion annually.

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In case of this tax remaining suspended in its entirety for the next financial year 2018-19, the overall accumulated losses in terms of revenue across Pakistan would jump to Rs123 billion.

In a written supply provided to the apex court, the tax regulator said another three-member SC bench in 2003 had validated the income tax, so it was a decided matter.

Supreme Court freezes tax deduction on prepaid cards

The FBR requested the Supreme Court (SC) to constitute a larger bench if it wanted to review the issue again.

The tax regulator in its written response to the SC said withholding tax on mobile phone cars was an adjustable tax, which was claimable by return filers at time of filing returns.

It added it was aware of increasing burden and had worked on decreasing the withholding tax rate which was brought down to 12.5 percent from 14.5 percent and was to be reduced further gradually.

Lastly, the FBR asserted this was a tax on consumption and stated if a poor man was paying sales tax on a matchbox worth Rs10, how could a tax on prepaid mobile cards be termed illegal.

Furthermore, the tax regulator contented this would mean all other taxes should get suspended if consensus was reached that the poor shouldn’t pay consumption tax on mobile cards.

It declared before the apex court, tax on a mobile phone prepaid card was applicable in various countries including India, Bangladesh, Thailand etc.

The FBR said mobile phone call rates in Pakistan were the lowest amongst neighbouring countries but SC did agree with the argument presented but decided to strike down the collection of tax on phone cards.

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