Latest news with #FinanceAct2015
Express Tribune
05-04-2025
- Business
- Express Tribune
Telcos protest exclusion from tariff relief
Listen to article Telecom companies have expressed frustration and serious concerns over being excluded from the government's recently announced electricity tariff relief, citing the long-standing denial of industrial status benefits despite being declared an industry by the government in 2004. On Thursday, Prime Minister Shehbaz Sharif announced a significant reduction in electricity rates — a Rs7.41 per unit decrease in the national average tariff and a Rs7.69 per unit cut for industries. The relief was lauded as a positive development; however, telecom companies say they have once again been left out. Speaking to The Express Tribune, "The telecom sector was granted industry status in 2004, yet we continue to be denied the corresponding benefits," said Kamal Ahmed, Secretary General of the Telecom Operators Association (TOA). He said the sector continues to face high operational costs due to the lack of electricity tariff reductions for its core components. According to the association, power is one of the largest cost components for telecom operators, who must keep thousands of cell towers and data centres running round the clock. "Industrial electricity tariffs would significantly ease our operational costs," Kamal Ahmed added. Wahaj Siraj, Co-founder and CEO of Nayatel, also voiced concern over the exclusion of the telecom sector from the electricity relief package. "Great move to reduce electricity rates, but the telecom industry, data centres, cloud platforms, et al, don't get this rate despite being declared an industry by the government since 2004," he said on social media. He questioned how Pakistan could aspire to become an IT powerhouse when critical digital infrastructure such as data centres is deprived of industrial electricity rates. The telecom companies lamented that despite detailed hearings at the National Electric Power Regulatory Authority (NEPRA), telecom operators and data centres are still billed at commercial rates. "There is a disconnect between policy and implementation," Ahmed maintained. As the federal government prepares the budget for the fiscal year 2025-26, telecom companies have called for urgent tax and policy reforms to address mounting financial and regulatory challenges facing the crucial sector. The industry has urged the government to exempt telecom companies from withholding tax obligations under the Income Tax Ordinance (ITO) 2001, describing the current system as overly complex and burdensome. "Telecom operators are utility providers managing millions of transactions daily. The current tax regime increases compliance costs and stifles growth," the TOA Secretary General said. The industry is also seeking to reverse a change made under the Finance Act 2015, which converted adjustable withholding tax into a fixed minimum tax of 4% under Section 153(1)(b) of the ITO. This, they argue, disproportionately affects telecom companies, especially amid rising costs and high inflation. "Taxation should reflect actual earnings, not penalise compliant businesses with arbitrary fixed rates," Ahmed said. The association has also called on the government to end coercive tax enforcement actions such as freezing bank accounts or sealing offices. These measures, it argues, should be reserved for habitual defaulters, not compliant companies. "Tax recovery should begin only after an independent appellate tribunal reviews a case," Ahmed added. In a bid to retain skilled talent, the TOA also urged the government to introduce targeted tax relief for telecom employees. The rising tax burden on salaries, combined with inflation, has made it harder to attract professionals to the sector. The TOA is also advocating for the reduction of income tax under Section 236 - currently at 15%, up from 12.5% - and the rollback of the Federal Excise Duty (FED) rate from 19.5% to 16% under the Finance Act 2021. "Lowering these rates would not reduce government revenue, but rather support digital growth and long-term economic inclusion," Ahmed said.
Express Tribune
26-03-2025
- Business
- Express Tribune
Telecom sector seeks tax break
Listen to article The Telecom Operators Association has called for addressing several issues including tax exemptions in the upcoming budget for fiscal year 2025-26 for smooth activities of telecom firms. In a letter sent to the finance minister, the association said that the telecom industry plays a vital role in economic growth, contributing significantly to revenue generation, digital inclusion and employment. However, several fiscal and policy challenges need to be addressed to ensure sustainable growth and advancement of the sector. In this regard, it has submitted key recommendations for the budget. The industry has demanded exemption from withholding taxes. Cellular mobile operators (CMOs), as major utility providers, face complex and costly withholding tax compliance due to a large number of transactions subject to income tax deductions under the Income Tax Ordinance (ITO) 2001, including utility bills, sales to corporate customers and imports. The current withholding tax framework creates significant administrative challenges and negatively impacts business environment in the telecom sector. To enhance tax compliance efficiency and foster a more business-friendly environment, the telecom industry has proposed extension in exemption from all withholding tax provisions under the ITO 2001. This will simplify the advance tax payment process, allowing CMOs to make payments of quarterly installments under Section 147 of the ITO. This measure will not result in any revenue loss to the FBR as telecom companies will continue to make quarterly advance tax payments. Adjustment to withholding tax The Finance Act 2015 introduced a significant change to Section 153(1)(b) of the ITO 2001, replacing adjustable withholding tax with a minimum tax on services provided by telecom companies and other service providers. This shift has effectively turned income tax from a direct tax into an indirect tax, as the tax payable is no longer tied to actual income but is instead a fixed charge applied uniformly, regardless of profitability. The 4% minimum tax rate imposed on telecom services is disproportionately high and negatively impacts the profitability of telecom companies, which are already struggling due to discriminatory taxation and financial difficulties. The administrative burden has also increased, as telecom companies now face the cumbersome task of collecting tax deduction certificates from thousands of corporate customers nationwide. To ease financial difficulties and reduce tax costs, it is recommended that the withholding tax be made adjustable once again. The companies demanded that taxpayers who comply with their obligations should not be subjected to unfair practices or undue pressure. The telecom association said that actions such as freezing bank accounts or halting business operations by sealing premises should only be undertaken when absolutely necessary and justified. These measures can cause undue disruptions and have adverse effects on the economy. While enforcement powers are necessary to recover due taxes from defaulters, current provisions should address the genuine concerns of compliant taxpayers. It said that recovery powers should distinguish between habitual tax defaulters and genuine taxpayers. Exaggerated tax demands and forced recoveries undermine the business environment, investor confidence, and foreign direct investment. Recovery proceedings should not be initiated until an appeal has been decided by at least one independent appellate forum, such as the Appellate Tribunal. The association has urged tax relief for telecom sector employees saying the surge in income tax on employee salaries, coupled with hyperinflation, has made it increasingly difficult for the industry to attract and retain top talent. High income tax burdens, combined with rising inflation, significantly reduce disposable income, making the sector less appealing to skilled workers essential for digital infrastructure and economic growth. To balance revenue collection with workforce retention, sector-specific tax reforms should be introduced, including inflation-indexed tax brackets, increased exemptions for essential expenses, lower withholding tax rates, and special tax incentives for telecom professionals. They asked for reduction in income tax and FED rates. The applicable income tax under Section 236 of the ITO 2001 is currently 15%, up from 12.5% via the Finance (Supplementary) Act 2022. Previously, the tax rate was set to decrease to 8% from 2022 onwards. Additionally, under the Federal Excise Duty (FED) Act 2005, the applicable rate has risen from 16% to 19.5%. Since telecom products are already priced inclusively of taxes, reducing these rates would encourage revenue growth rather than suppress it.
Express Tribune
22-02-2025
- Politics
- Express Tribune
IHC declares Section 7 of Finance Act null and void
The Islamabad High Court (IHC) has declared Section 7 of the Finance Act 2015 void ab initio, declaring it contradictory to the Constitution, and struck it down along with all orders and actions taken under its provisions, including notifications. Justice Arbab Muhammad Tahir issued a detailed verdict on a petition challenging the amendment made to the Auditor General Ordinance 2001 through the Finance Act. The ruling stated that the Constitution is the supreme law of the land and all legislation derives its authority from it. If any law exceeds its given powers or contradicts a constitutional provision, it is deemed beyond legal authority (ultra vires) and unconstitutional. The judgment further stated that parliament enacts laws within the constitutional framework and that any legislation conflicting with the Constitution or its Parent Act is rendered ineffective. For a law to be valid, it must be logical and clear and must not contradict general legal principles or Constitution. The ¬court ruled that by-laws could be annulled if they are enacted in violation of legal procedures, contradict other laws or go against their parent legislation. By-laws that are ambiguous, unclear, unreasonable or illogical can also be declared void.
