FTO Exposes Telecom Tax Tactic—Are You Paying More Than You Should?

The Federal Tax Ombudsman (FTO) has instructed the Federal Board of Revenue (FBR) to investigate Wateen Telecom Ltd. for allegedly issuing incorrect tax deduction certificates to salaried individuals. This directive follows a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000.

The complainant, a long-time Wateen internet subscriber and salaried taxpayer reported receiving annual tax deduction certificates reflecting a 15% deduction, as mandated by the Income Tax Ordinance, 2001. However, this year, Wateen failed to provide a certificate corresponding to the payments made. Despite reaching out to the FBR for assistance, the complainant received no resolution and subsequently filed a complaint with the FTO.

In response, Wateen Telecom explained that they had restructured their billing by separating the Internet Monthly Line Rent (MLR) into two components: ‘Internet’ and ‘Infrastructure.’ They asserted that the ‘Infrastructure’ portion is exempt from Withholding Tax (WHT), resulting in a decreased taxable amount and a lower total on the tax certificate for fiscal year 2024.

The FTO noted that, although Wateen provided an explanation for the billing changes, they failed to cite any legal provisions justifying the sudden separation of the MLR and the exclusion of one component from tax withholding. The FTO expressed concern that other telecommunications companies might adopt similar practices. Additionally, the FBR’s lack of response to the taxpayer’s alert was deemed indicative of maladministration.

Consequently, the FTO has recommended that the FBR’s Members of Inland Revenue Operations and Policy review Wateen’s explanation in light of relevant laws and submit a compliance report within 45 days.

The FTO’s directive highlights the importance of transparency and adherence to tax laws by corporations. It also highlights the need for regulatory bodies like the FBR to actively monitor and address taxpayer concerns to maintain public trust in the tax system.

Also read:

Telecom Tax Dispute Escalates to SIFC for Resolution