Telecom operators approach SIFC, call for abolishing proposed penalties

LAHORE: The Telecom Operators Association has approached the Special Investment Facilitation Council (SIFC) for the abolishment of proposed fines for the telecom sector under Section 114-B and Section 236 in the Finance Bill 2024-25 in a letter to National Coordinator of the SIFC Lt General Sarfraz Ahmed on Friday.

The proposed sections call for the penalization of the telecom sector under the Income Tax General Orders (ITGO) and the collection of 75 per cent advance tax on mobile services for non-compliant tax filers.

In its letter, the association highlighted the inability of the sector to collect 75 per cent advance tax on mobile services for non-compliant tax filers and requested the abolition of the newly proposed section.

Telecom companies have already raised their voice and concerns with the relevant government authorities, including the finance minister and the chairperson of the Federal Board of Revenue (FBR).

The telecom sector also raised their concerns in the Senate Standing Committee on Finance meeting held a day before on several proposed tax measures revealed by the government in the FY25 budget.

“We wish to emphasize through the SIFC the regressive nature of punitive actions proposed against telecom operators (foreign investment-based entities); the impracticality of such measures; and systemic limitations faced by telecom operators,” the association pleaded in the letter.

On abolishing the unwarranted penalization of the telecom sector under the Income Tax General Orders (ITGO), the association added: “The proposed fines of Rs 100 million and Rs 200 million (every fortnight) concerning ITGO implementation by the telecom sector for non-filers is discriminatory and unjust. Using the corporate sector for ITGO enforcement and imposing such huge fines in case of even minor lapse for which the telecom sector is not responsible is uncalled for and deters foreign investment.”

The Senate Standing Committee on Finance also endorsed telecom operators’ demand of the withdrawal of the proposed amendment in IGTO in its meeting held on Thursday (June 20).

About the proposed 75 per cent advance tax, the operators said that “our systems currently lack the capability to distinguish between compliant and non-compliant tax filers for withholding tax purposes. With over 180 million subscribers (of the telecom sector), implementing suchamendments at this juncture is operationally unfeasible and impractical.”

The Telecom Operators Association, in its letter, lauded the cooperation of the finance minister and the chairperson of the FBR on this matter and assured the industry’s commitment to assisting the FBR in achieving its goals wherever possible.

Industry officials mentioned that all essential services including the banking sector, ATMs, credit cards, e-commerce, passport control, security institutions, national database, E-commerce, digital applications are connected and governed through the internet bandwidth and services provided by Telecom Companies.The imposition of sales tax at 18 per cent on handsets below $500 and 25 per cent on more than $500 will impede broadband penetration and digitalization in Pakistan.