Islamabad, Feb 9: The Federal Tax Ombudsman (FTO) has uncovered a concerning practice by a telecom operator, where salaried individuals have been issued incorrect tax deduction certificates with lower amounts than expected. This discrepancy went unnoticed by the Federal Board of Revenue (FBR), raising concerns about regulatory oversight.
In response, the FTO has instructed the FBR to investigate this pattern and ensure compliance. The issue was highlighted through a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000.
The complainant, a salaried individual and a regular filer, has been using telecom services for years. According to the Income Tax Ordinance, 2001, he receives a tax deduction certificate reflecting 15% of the total amount paid. However, this year, the telecom company issued a certificate with a reduced tax deduction amount, despite his consistent payments.
Upon seeking resolution through the FBR, the complainant found no assistance, prompting him to escalate the matter to the FTO. The telecom company justified the discrepancy by citing a structural adjustment, where the Internet Monthly Line Rent (MLR) was split into two categories: Internet and Infrastructure. The company claimed that the infrastructure component is exempt from Withholding Tax (WHT), leading to a lower taxable amount and, consequently, a reduced tax certificate for the fiscal year 2024.
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Despite providing an explanation, the telecom company failed to reference any legal provision that permits such a sudden reclassification of charges. The FTO noted that other telecom companies might adopt similar practices, further affecting taxpayers. Additionally, the FBR’s inaction in addressing the taxpayer’s concerns reflects poor regulatory oversight. The field offices of FBR have shown indifference to a crucial issue that directly impacts tax collection and compliance.
As a corrective measure, the FTO has directed FBR’s IR-Operations and Policy members to thoroughly review the telecom company’s explanation and determine its legal validity. The FBR has been given a 45-day deadline to submit its findings and ensure compliance with tax regulations. This case underscores the urgent need for stricter monitoring to prevent such discrepancies and uphold taxpayer rights.
