Directorate General Intelligence and Investigation Inland Revenue (IR) Federal Board of Revenue has cautioned all Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to ensure timely deduction of withholding tax by Long Distance International (LDI) operators after setting up of International Clearing House (ICH).
In this connection, the FBR has issued instructions to all LTUs/RTOs here on Thursday to explore this opportunity for taxing the revenues of the LDIs. The agency has timely intervened for collection of huge amount of taxes from the LDIs following setting up of ICH. Sources said the FBR's field formations would keep a constant liaison with the ICH to timely collect all taxes particularly withholding taxes being deducted by the LDI operates. The FBR would also ascertain whether the IHC could be declared withholding agent for LDIs. The successful exercise on the guidance of the directorate of intelligence IR would be instrumental in increasing revenue collection in the remaining quarters of 2012-13.
According to the agency's instructions, Pakistan Telecommunication Authority (PTA) has established the ICH for LDI operators wef October 1, 2012. With the setting up of the ICH, all incoming international calls will land at a single technical exchange/gateway instead of landing with 14 different LDIs, currently registered with the PTA.
The establishment of the ICH will not only result in the proper documentation of the international calls but at the same time is expected to bring tremendous enhancement in revenues for the LDIs. As per LDI operators, it has been admitted that the ICH was able to make earnings of Rs 3.78 billion in the first 15 days of October 2012.
The directorate of intelligence IR has also provided relevant lists of LDIs falling within the jurisdiction of the LTUs and RTOs. For ensuring proper and timely taxation of the revenues of the LDIs, immediate and well-co-ordinated plan of action is needed:
As per plan of the directorate to generate maximum revenue from the LDI operators, the field formations would ensure the proper and timely deduction of withholding taxes by the LDIs on payments received on account of international calls. For this, constant liaison with the ICH could yield fruitful results.
Secondly, LTUs/RTOs would vigilantly monitor payment of advance tax on the admitted revenues by the LDIs. Thirdly, the LTUs/RTOs would conduct periodic, but constant, comparison of the results declared by the LDIs with figures of the IHC. Fourthly, since the PTA/IHC falls within the jurisdiction of the LTU, Islamabad, due cognisance may be taken of the incremental revenue accruing to PTA on account of the-fees/royalties from the LDIs with special reference to the Advance Tax monitoring. Additionally, an exercise is needed to be carried out to understand the functional mechanism of the IHC.
The exercise may focus on understanding such facts as whether the IHC will exercise only functional/regulatory control over the international calls for the LDIs or whether its mandate will also include financial control over the payments. In case of the latter, it needs to be seen whether the IHC could be declared withholding Agent for LDIs, directorate of intelligence IR added.