The Islamabad High Court has delivered a significant blow to the federal government by staying the blocking of mobile phone SIMs belonging to non-filers of tax returns.
This decision comes in response to a plea filed by a private company and will remain effective until May 27, 2024.
The plea was presented before the Islamabad High Court by Salman Akram Raja, representing Zong, as Chief Justice Aamer Farooq presided over the hearing on Tuesday. Raja argued that the government’s amendment to the law, which mandated the blocking of SIMs for non-filers, violated Article 18 of the Constitution, which guarantees freedom of trade, business, or profession.
This ruling strikes a chord with concerns voiced by the Global System for Mobile Communications Association regarding the government’s initiative to widen the tax base.
The Federal Board of Revenue (FBR) had previously directed all telecom operators to block SIMs belonging to non-filers by May 15, 2024. This directive came after a prior order from the FBR to the Pakistan Telecommunication Authority and telecom companies to block over 506,000 mobile phone SIMs of non-filers.
According to sources, telecom operators had agreed to implement the blocking of SIM cards manually in smaller batches. Rather than imposing direct penalties on the over 570,000 identified tax evaders, the FBR had opted to enforce an additional withholding tax of 90% on them.
Under this arrangement, every recharge made by a tax evader would incur a deduction of 90% by the FBR. For instance, if a user reloads Rs100, Rs90 would be deducted by the tax authority. Furthermore, if a tax evader attempts to activate another SIM card after their current one has been blocked, they would face an additional 90% tax on it.
The punitive measures extend beyond SIM card usage, encompassing mobile phone usage and data usage as well. It’s a multi-faceted approach aimed at incentivizing compliance with tax filing regulations.
However, the Islamabad High Court’s intervention has put a temporary halt to this strategy, citing constitutional concerns. The implications of this decision are significant, not only for the telecom industry but also for the broader efforts of the government to bolster tax revenue through innovative means. As the legal battle unfolds, stakeholders eagerly await further developments in this ongoing saga.
