The imposition of two new taxes on the pay phone industry in the budget (2005-2006) will raise the call charges at the Public Call Offices (PCOs) directly hitting the poor people using phone booths across the country. The Finance Bill (2005-2006) proposed levy of 10 percent withholding tax under section 236 of the Income Tax Ordinance 2001 on all telephone bills exceeding Rs 1,000 per month. Secondly, 15 percent central excise duty (CED) has been imposed on the supply of pay phone cards used in the public telephone booths.
Sources told Business Recorder on Wednesday that these proposals, if implemented, would have serious implications for both the industry as well as general public. First, the budgetary measures have resulted in double taxation for payphone operators, as they are already liable to pay 'Advance Tax' under section 47 of the Ordinance 2001.
Secondly, an exemption could be claimed from income tax u/s 47 based on 'individual tax status', but the new levy under section 236 does not provide any such mechanism for this industry. This would essentially result into negative cash flow for the payphone operators leaving them no option but to close down operations from July 1, 2005.
The introduction of 15pc CED/GST would directly result into higher cost of telephone calls for the poor and closure of payphone companies and PCOs would result into unemployment for over one million people and economic distress for as many families. The CBR has estimated to generate Rs 1,500 million by levying 15 percent CED on the industry.
According to an estimate, these taxes will hurt 200,000 public call offices.
Sources said that it is strange that on one hand, the CBR has imposed heavy taxation on payphone sector while, on the other hand, exceptional relief has been granted to the cellular phone sector.
The activation charges have been reduced on mobile telephone connections from Rs 1,000 to Rs 500 per connection. Moreover, the section 114 of the Income Tax Ordinance 2001 has been amended to withdraw the condition of compulsory filing of returns by the subscribers of telephone, including mobile phone. If there was a need to raise revenue then why the CBR ignored rich people's cellular industry and slapped taxes on the commonly use item of the poor people.
Payphone operators essentially are reseller of basic telephone service company ie, PTCL, and not user of telephone. These payphone operators are a mere part of a supply chain, wherein the actual users are unable to afford a phone at home or use a cellular phone, thus paying a few rupees for individual calls.
Comments
Comments are closed.