The Federal Board of Revenue (FBR) Friday informed the Senate Standing Committee on Finance that analysis of data of a telecom company unearthed short-deduction of withholding tax of Rs 267 million upon cards sold/balance used in Federally Administered Tribal Areas (FATA) and Provincially Administered Tribal Areas (PATA). The FBR updated the committee about the withholding tax audit of telecom sector here at the Parliament House.
The FBR also submitted a progress report on the audit of withholding taxes collected by telecom sector. The FBR informed the committee that initial data analysis has reflected short deduction of tax amounting to Rs 267 million. This default is primarily due to non-deduction of withholding tax upon cards sold/balance used in FATA/PATA. The telecom company was bound to withhold income tax. Proceedings in this case under the Income Tax Ordinance, 2001 are underway. Further progress will be shared in due course of time.
The withholding tax audit of other telcos would be carried out after taking into account the outcome and inference(s) drawn from the withholding audit of the said telecom company. Presently, four mobile/cellular telephone companies are operating in Pakistan and, in the process, are generating a massive volume of customers'' transactions running into millions of rupees on daily basis.
Considering the massive challenge of analysis of multimillions rupees of transactional data, the FBR has launched a pilot project - an IT-based electronic data sharing link - for uploading of subscribers'' withholding transactional data for conducting meaningful audit of withholding taxes thereof. Under this project, all the four cellular companies are now uploading their transactional data through IT/PRAL provided interface since July 2017 and the Pakistan Revenue Automation Limited (PRAL) team remains in constant contact with the telcos'' technical teams to resolve any issues related to harmonization of data as per format.
To start with, the data uploaded on the IT-based electronic data sharing link by one telecom company was picked up for withholding audit for the months of July to September, 2017. A team was constituted headed by the concerned additional commissioner (IR) with inclusion of members from the IT/PRAL Wing.
The team has conducted on-site visit for cross-matching of withholding data uploaded by the company on the abovementioned link, for about 40 million customers. During the team''s visit, the company explained the main components of their system - voucher management system, warehouse management system and ATM top-up mechanism.
Initial data analysis has reflected short deduction of tax amounting to Rs 267 million. This default is primarily due to non-deduction of withholding tax upon cards sold/balance used in FATA/PATA. The withholding tax audit of other telcos would be carried out after taking into account the outcome and inference(s) drawn from the withholding audit of the said company.
The members of the Senate Standing Committee on Finance Friday strongly pleaded to take strict action including penalties/fines against telecom companies where withholding tax audit by the Federal Board of Revenue (FBR) detects tax evasion. The committee members and member FBR agreed that this is not possible for a telecomm company to deduct withholding tax from one area and not from some other area as the same recharge cards are available across the country.
The meeting held under the chairmanship of Senator Saleem Mandviwalla here at the Parliament House on Friday was attended among others by Senators Murtaza Wahab, Nasreen Jalil, Kamil Ali Agha, Mohsin Aziz and Mohsin Leghari, and officials from Finance Division and FBR. The committee was told that audit of other telecom companies will also begin shortly as they have now submitted their transaction data. After audit of withholding taxes, the same for sales tax will be conducted.
The committee also passed "The Auditor General''s (Functions, Powers and Terms and Conditions of Service) (Amendment) Bill, 2017" with amendments. Among other amendments, it was also specified that the Auditor General shall be a grade-22 officer serving in the department for at least 15 years without deputation.
The meeting was also given update on anomaly of withholding tax deducted on bonus share issued in respect of mutual funds, rules made under Benami Act, 2017, separation of cadres of accounts and audit, appointment of independent officer for audit of AGP and draft bill in respect of Federal Consolidated Fund and Public Account. The committee demanded progress reports on the matters by January 15.
The public petition regarding merger of house rent into salary of government servants instead of following the current process of hiring was disposed of and referred to Housing and Works Department for consultation with Finance Division.
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