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October 30, 2020

Foreign investors see FBR action as detrimental to FDI inflows


October 30, 2020

KARACHI: Foreign investors on Thursday slammed the blatant action of the Federal Board of Revenue (FBR) of sealing the premises of a country’s leading telecom services provider, terming it as a setback to the government’s plan to attract investments from abroad.

Overseas Investors Chamber of Commerce and Industry (OICCI) expressed its shock and dismay at the action of the FBR Large Tax Payer Unit (LTU) Islamabad of sealing the premises of the Pakistan Mobile Telecommunication Limited, widely known across the country as Jazz, within hours after serving a notice for payment of an alleged tax demand.

“Without going into details of the legality of the tax demand, the manner in which officials of the LTU Islamabad acted in the matter, against one of the largest taxpayers in the country is most disappointing as this blatant action is a huge setback for government of Pakistan and OICCI’s joint efforts to attract FDI (foreign direct investment) in the country,” said Haroon Rashid, president of OICCI that represents 200 multinational companies in Pakistan.

FDI in Pakistan is the lowest in the region, standing at less than one percent of GDP.

“Abrupt and unjustified action like this will go against the declared emphasis of the senior leadership of the government towards the ease of doing business and facilitating large inflow of FDI for harnessing the massive economic growth opportunities and promoting export and employment,” said Rashid. “The sealing of the premises of the largest mobile operator is bound to create ripples within the foreign investors’ community operating in Pakistan, and may negatively resonate in the business chambers of 35 countries from where OICCI member companies have come to do business in Pakistan.”

OICCI urged the FBR to immediately engage with the management of Jazz for an amicable resolution of the matter, in a more investor friendly manner.

Jazz also contested the tax recovery notice sent to the company by the FBR. The company’s spokesperson said Jazz received a notice from the FBR for the recovery of a disputed tax demand.

“We have serious reservations on these alleged taxes,” the spokesperson said in a statement. “The proceedings were carried out on plea of a tax recovery notice for a disputed amount from 2018 which is under legal proceedings.”

The spokesperson said Jazz is the country’s number one 4G operator and the largest internet and broadband service provider.

It is amongst the largest taxpayers and the biggest foreign investors with an investment of over $ 9.5 billion during the last 25 years.

“In the last 6 years alone, Jazz has contributed over Rs251 billion to the national exchequer in the form of taxes and duties,” said the spokesperson.

The taxation case is related to the acquisition deal with around Rs25.4 billion of tax demand created by the Islamabad LTU. In 2017, Edotco Group, a subsidiary of Malaysian telecom operator Axiata, and Dawood Hercules Corp unveiled a plan to acquire Deodar, the tower unit of Pakistan Mobile Communications operating more than 13,000 cellular towers.

Jazz spokesperson said the company seeks resolution of the matter and has always been willing to conduct dialogue as well as rightful legal course to reach merit and right interpretation.

“Due to the drastic measures our corporate reputation and pride has been hurt and shakes the confidence of foreign investors of Jazz and others,” said the spokesperson. “Despite being the largest taxpayers, we are treated in an unfortunate way.

While the government is making efforts to improve the business environment in the country, such drastic measures would unfortunately severely affect investment prospects.”