SC suspends tax on mobile cards

LAHORE: Chief Justice of Pakistan (CJP) Saqib Nisar on Monday suspended the ‘exorbitant tax deductions' from mobile phones pre-paid calling cards and easy load by companies as the apex court gave a two-day deadline to the Federal Board of Revenue (FBR) to follow the orders pertaining to the suspension.

A three-judge bench comprising Chief Justice Nisar, Justice Ijazul Ahsan and Justice Umar Ata Bandial was hearing a suo motu case at the Supreme Court Lahore Registry. During the hearing, FBR Chairman Tariq Pasha and lawyers of cellular companies present in the court were unable to answer a query repeatedly asked by the judges that under what law a person not liable to pay tax could be forced to pay tax.

The FBR chairman said, “At least 130 million people use the mobile phones while tax deduction is the personal act of the companies. Only 5 per cent people in the country pay taxes.” He admitted that there was no mechanism to distinguish between the people liable and not liable to pay tax.

“If you have no such mechanism, then your policy to collect tax is sheer discriminatory in nature and the court has power to set aside the same,” Chief Justice Nisar told the FBR head. The court remarked, “The public is being looted. How can tax be received from a street vendor? Deduct tax from the person whose mobile phone usage is more than set limits.”

“Rs38.08 are deducted on a prepaid mobile card of Rs100,” Chief Justice Nisar remarked. “This is illegal.” “How can tax be received from a person who does not come in the tax net? It is illegal to provide Rs64.38 to a person who charges Rs100 card in his phone. A comprehensive policy should be made over the tax deduction,” directed the court.

“Not distinguishing between a taxpayer and defaulter is discrimination. As per the Constitution, this discriminatory policy can be annulled,” said the chief justice. Justice Ijaz said a policy on levying tax ought to be formulated. “How can a hawker be brought into the tax net?” he said.

The chief justice also criticised subsidised night call packages offered by the cellular companies to attract the youth. “These call packages have badly damaged the culture of our country,” he observed.

Justice Bandial also noted that the FBR had been outsourced half of its functioning as it had been collecting tax through private companies. The FBR chairman and counsel of the companies sought time from the court to device a policy on the matter and to remove shortcomings in the system. However, the chief justice flatly turned down the request and observed that the court would not allow violation of the law anymore.

“Take time as much as you need to make a system but we are abolishing these surcharges now,” he told them. Initially, the court ordered the companies to stop deducting the taxes from the mobile phone cards immediately; however, he later gave them two days for the implementation of the order when their lawyers cited technicalities of system.

The bench directed the FBR and the cellular companies to present within two weeks a plan to separate those mobile phone users not liable to pay tax from their tax collection system. The court observed that ordinary cell phone users were "being looted" due to the taxation measures in place on prepaid cards.

The chief justice said that only people whose cell phone usage crosses certain limits should be taxed. The top judge said that a comprehensive policy should be formulated on taxes imposed on prepaid cell phone cards.

The FBR, via an illustration, had earlier explained to the SC that every time a consumer loads an Rs100 mobile card, 12.5 per cent of the total amount gets deducted as adjustable withholding tax, while 10 per cent of the whole goes to the telecom company as service charges.

With the telecom company taking its cut, the 19.5pc sales tax also kicks in. However, it is applied only to the telecom company's 10pc rather than the entire Rs100 card. At this point, the consumer is left with Rs76.94 — of which the government charges 19.5pc sales tax (Rs15) to the consumer for making calls and sending SMS.

In the end, as per the FBR calculation, the net amount left with the consumer for his actual consumption on an Rs100 charge is Rs61.93. Separately, the chief justice remarked that every newborn in Pakistan owes a heavy loan due to the “mistakes and failed policies of previous governments”.

The chief justice wondered that no restriction or law was introduced to thwart illegal flight of money abroad. We wanted to know the details of every Pakistani who holds foreign assets or accounts.

He asked the FBR chairman what progress has been made in the matter of trillions of dollars of Pakistanis lying in Swiss accounts. The court asked the FBR officials to furnish all the details in the court by midnight.

The remarks came as he headed a three-judge bench which was hearing a case regarding foreign assets and bank accounts held by Pakistani citizens. Justice Umar Atta Bandial and Justice Ijazul Ahsan were the other members on the bench.

Lashing out at the State Bank governor and secretary finance for not appearing before the court, Chief Justice Nisar said, “We are hearing a crucial case regarding public welfare but the State Bank governor and secretary finance are not bothered.”

Chief Justice Nisar, while stating that even every newborn in Pakistan is indebted owing to the failed policies of previous governments, asked, “How much does each newborn owe?”

Irked by non-implementation of apex court directives in the case of overseas belongings and financial institution accounts maintained by Pakistanis, he questioned about the quantity of money owed by each little one.

Being censured over laundering of trillions, sharp decline in exports and challenge of smuggling, the chief justice requested “why investigation has not been carried out for the capital of trillions that was being laundered to Switzerland?”

Chief Justice Nisar said, “Exports are diminishing and imports are increasing. “No one could stop smuggling,” he further said. It must be on the file the number of belongings and financial institution accounts every Pakistani owns abroad, he added.

He additionally requested for all the small print of loans taken by finance ministry in the last 10 years and added, “They take loans and leave those children to bear the brunt who are not even born as yet.”

Questioning the performance of the last two governments, Justice Nisar said, “Just look at the state of health, education and provision of clean drinking water.”

During the course of hearing, the chief justice also dispelled the impression that the apex court had rejected the amnesty scheme. “Who says that we’ve rejected the Amnesty Scheme? We have now not been knowledgeable with regard to the Amnesty Scheme,” he commented.

Justice Bandial asked FBR Chairman Tariq Pasha, “Why don’t you bring the amnesty scheme in the knowledge of the court.” Pasha, however, remained silent.

He said the court order pertaining to foreign assets and accounts had been enforced in letter and spirit. “No one has the right to make a child indebted even before his birth,” he added. The State Bank of Pakistan’s latest figures stated that every Pakistani is now indebted by Rs130,000. The court also sought details of foreign loans borrowed by the finance ministers during the last 10 years and the foreign visits they made.