The Federal Tax Ombudsman (FTO) has exposed a questionable tax practice by Wateen Telecom Ltd, raising concerns over potential tax evasion within the telecom industry. The company has been found issuing fewer tax deduction certificates to salaried individuals, prompting the FTO to direct the Federal Board of Revenue (FBR) to investigate the matter.
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A formal complaint was lodged against Wateen Telecom Ltd under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, by a salaried individual who has consistently received a 15% tax deduction certificate under the Income Tax Ordinance, 2001. However, this year, despite making payments to Wateen, he did not receive the necessary tax certificate, hindering his ability to file tax returns.
In response to the complaint, Wateen Telecom Ltd attributed the reduction in tax deductions to an internal structural adjustment, wherein they divided the Internet Monthly Line Rent (MLR) into two components: Infrastructure and Internet. The company claims that since the infrastructure portion is exempt from withholding tax, the total taxable amount has been reduced, leading to lower tax deductions.
However, the FTO has challenged the legality of this move, demanding that Wateen Telecom Ltd provide a legal basis for splitting the MLR and excluding a portion from tax withholding. The FTO has also warned that similar practices by other telecom companies could lead to large-scale tax avoidance.
The FBR’s apparent negligence in addressing taxpayer complaints has further exacerbated concerns. The FTO has criticized the FBR’s field formations for their inaction despite repeated alerts from affected taxpayers. The failure to act on such complaints amounts to maladministration, according to the FTO.
The FTO has ordered the FBR’s Members of IR-Operations and Policy to thoroughly review Wateen Telecom Ltd’s explanation, ensure compliance with tax laws, and submit a detailed report within 45 days. This case highlights serious gaps in tax transparency within the telecom sector and calls for urgent corrective measures to prevent financial discrepancies and ensure compliance with taxation laws.
