Telecom operators in Pakistan have taken a significant step by blocking the SIM cards of over 3,500 non-filers, a number that exceeds the 5,000 cards they had committed to the Federal Board of Revenue (FBR) in accordance with its Income Tax General Order (ITGO). This action is a strong push to compel 506,671 individuals to submit their returns for 2023. The non-filers were duly warned that their mobile phone SIMs would be blocked if they failed to file their returns. Telecom companies have submitted a preliminary compliance report to the FBR and have agreed to block the SIMs of non-filers after a series of meetings with the FBR.
Despite initial resistance from the telecom companies, the FBR has taken a firm stance to address the issue of non-filing. It has decided to impose a withholding tax of 90%, a significant increase from the previous 2.5%, on the non-filers. This high withholding tax will be deducted from the mobile phone balance loaded by prepaid and postpaid non-filers through an automated system. The data about the SIMs of the non-filers that needed to be blocked has been handed over to the Pakistan Telecommunication Authority (PTA). The FBR has set a deadline of May 15 for the blocking of the SIMs. If this deadline is not met, the FBR is prepared to take legal action against the relevant telecom companies.
The FBR’s move to ensure compliance among taxpayers and enhance tax collection and enforcement mechanisms in the country has not been without its share of controversy. The decision by the telecom companies to resist the move and the FBR’s subsequent decision to impose a 90% withholding tax on non-filers has sparked a heated debate. The telecom companies had resisted the move by writing to the IT ministry and PTA, stating that they were mandated to provide uninterrupted services to their customers, except in the circumstances specified in the Telecom Act and relevant regulations.
Furthermore, the FBR’s decision to impose a 90% withholding tax on non-filers has been criticised by taxpayers and experts. This is because the high withholding tax could discourage people from paying their taxes, as it would be seen as a punitive measure. The FBR needs to consider other measures to encourage people to pay their taxes rather than impose such high taxes on non-filers.
