FBR advised to allow tax adjustment on telecom services

KARACHI: Federal Board of Revenue (FBR) has been urged to allow adjustment of withholding tax on services provided telecom sector.

The Overseas Investors Chamber of Commerce and Industry (OICCI) in tax proposals for budget 2019/2020 recommended that the eight percent minimum tax regime should be withdrawn and should be made adjustable.

The OICCI said that through Finance Act, 2016, an amendment was made in Section 153(1)(b) of the Income Tax Ordinance, 2001 whereby the 8 percent withholding tax deducted against the services provided by telecom companies, along with other service providers, have been subjected to a charge of minimum tax instead of adjustable regardless their actual income or loss.

This tax has thus changed the character of income tax from a direct tax to an indirect tax as the amount of charge would no longer be applicable on the quantum of income actually earned even under the standard income tax rules.

Furthermore, the exorbitant rate of 8 percent will seriously erode the profitability, or further increase the losses, of the telecommunication industry which according to independent reports is in shackles and is already the victim of discriminatory taxation.

Consequent to the above amendment in the law, non-issuance of exemption certificates under Section 153(1)(b) on Income Tax Ordinance, 2001 of the Income Tax Ordinance, 2001 in view of the imposition of the minimum tax has also increased the administrative burden of both the telecommunication companies and the withholding tax monitoring units of FBR as the tax that was previously deposited lump-sum as advance tax is now being collected by thousands of corporate customers across Pakistan.

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