The government’s legal order to disable SIM cards of over half a million non-filers of the income tax returns fell flat on its face when the Pakistan Telecommunication Authority (PTA) refused to implement it on the grounds that the order was inconsistent with the legal framework.
Instead the PTA–the telecom sector regulator – has advised the Federal Board of Revenue (FBR) to focus on “awareness campaigns through SMS” –a source of income for the telecom companies. It has also asked the FBR to be careful about the “prevailing social norms”.
The PTA’s refusal marks the first challenge to the government and the Special Investment Facilitation Council (SIFC) that was showing resolve to expand the narrow tax base to at least 6 million filers this year. Currently, less than 4.5 million people are filers of the income tax returns as against the registered persons of over 10 million.
“As per applicable legal regulatory regime, the execution of Income Tax General Order (ITGO) issued under section 114-B of Income Tax Ordinance, 2001 does not fall within the jurisdiction of the [PTA],” stated the authority in a correspondence with the FBR.
The PTA further said the FBR’s order would have no legal binding effect being inconsistent with the applicable legal framework. Maj General (retd) Hafeez Ur Rehman is the chairman of the PTA.
This week the FBR issued the Income Tax General Order to disable the mobile phone SIMs of 506,671 persons who were not appearing on the active taxpayer list but are liable to file the Income Tax Returns for Tax Year 2023 under the provisions of the Income Tax Ordinance, 2001.
It was the first major, much-needed step that the FBR has taken after all its reminders and tax notices could not convince the people to fulfill their statutory obligation.
Under the act of parliament, every person earning Rs600,000 annual income or owning at least 1,000cc car or a house is liable to file the annual tax statement.
The FBR had served tax notices on 2.4 million such non-filers and in the first phase requested blocking the SIM cards of over half a million who had taxable income and were earlier filing statements but did not file this time.
The PTA’s response came a day after Finance Minister Muhammad Aurangzeb instructed them to move legally against those who are resisting the implementation of the order to block SIM cards.
The PTA asked the FBR that it should consider factual issues with regard to usage of SIMs against CNICs before implementing these orders. According to the regulator, any person can obtain eight SIMs, which include three data and five voice’s SIMS.
The PTA said the FBR should first issue tax notices under Section 114-B of the Income Tax Ordinance, 2001. The FBR chairman has already stated that the FBR issued the notices to these non-filers but these people remained non-compliant.
“The impact of the execution of ITGO will also have an adverse impact on prevailing social norms,” said the PTA.
In Pakistan, male members of the society prefer to register SIMs against their CNIC names instead of females and juvenile
members of the family, said the regulator. It added as per available information only 27% SIMs have been registered against CNIC of females.
The PTA is also worried that children and female members of family using SIMs may be deprived from communication with specific reference to their educational activities.
But it has no concerns about the male heads of these families who are evading taxes in violation of the law and contributing to the country’s indebtedness.
The PTA said blocking the SIM cards may also have an adverse impact on the confidence of foreign investment in the telecom sector including objectivity of digital transformation.
As a result of blocking of SIMs, multiple issues will also emerge with regard to banking transactions, e-commerce, online business activities, remittance directly into the mobile money accounts and financial support to family members as well as e-health activities carried out through mobile connectivity.
“It is also suggested that instead of invoking the penal action in terms of blocking of SIMs at first instance, other alternative modes for ensuring better compliance for filing of income tax returns may be sorted out by carrying out awareness campaigns, sending SMS etc”.
A senior FBR official said the PTA had been consulted before issuing the order to block the SIMs. The connections have to be severed by the telecom companies but the PTA being the regulator had to play a key role.
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