FBR Fails to Analyse WHT of Telecom Companies due to Capacity Constraints

A meeting of senate standing committee on Finance enlightened the capacity constraints of FBR. The committee was headed by Senator Saleem Mandviwalla. The committee had called FBR for an update on audit of telecommunication companies. The telecom operator deduct withholding taxes on pre-paid mobile cards and other transactions. FBR Fails to Analyse WHT of Telecom Companies due to Capacity Constraints.

It was shocking to know that FBR don’t have capacity to analyse transaction wise data of withholding taxes collected by telecommunication companies. This capacity constraint of FBR was overburdening existing taxpayers to meet annual targets.

FBR Fails to Analyse WHT of Telecom Companies due to Capacity Constraints

Director General of Withholding taxes admitted that the FBR was not receiving 100% transaction data from the telecommunication companies due to capacity constraints. However he also told that FBR has developed an online interface with telecommunication companies. It is a big question mark over FBR’s performance.

Knowing about the inability of FBR to perform efficiently, standing committee decided to outsource audit functions to private sector. Commissioner of telecommunication sector, Shakil Kasana said that over that last 10 years FBR did not have the capacity to analyse data. He revealed that four mobile operators were collecting Rs.4 billion per month withholding taxes from mobile users.

Shocking revelation was also made that billions of rupees taxes wasn’t fully collected from tax payers. Those which were collected couldn’t reach state coffers or ended up in hands of withholding agents.

According to World Bank report, the amount of tax evasion in Pakistan was around Rs. 3.4 trillion. However FBR’s tax to GDP ratio margianally slipped to 10.6 %. It clearly shows contradiction in FBR’s policy.

Tanveer Khawaja, FBR’s Member Inland Revenue Operations said:

Telenor Pakistan, which has 36% market share, generated Rs98.1 million in withholding taxes in July and the FBR did not have the systems to monitor such big data in the past

Telecommunication is not the only sector where FBR is not performing well. They have no documentations regarding cigarettes manufacturers who have bypassed over Rs. 60 billion in taxes over the past one year alone.

Also Read: FBR to Introduce a Mechanism for Tax Collection from Telecom Operators