PTA to bar tax scam cellcos from 3G auction

30 Aug 2012

Pakistan’s senate sub-committee of the Ministry of Information Technology and Telecommunications (MoITT) has instructed sector watchdog the Pakistan Telecommunication Authority (PTA) to bar cellcos involved in the tax evasion scam from participating in a future auction of 3G concessions. The Business Recorder reports that the decision came after the committee heard the former Director General of the Large Taxpayer Unit (LTU), Ijaz Hussain Shah claim that he had been pressured by the Chairman of the Federal Board of Revenue (FBR) into signing an agreement granting five telcos – National Telecommunications Corporation (NTC), Pakistan Telecommunications Mobile Company Ltd (PTML), Telenor Pakistan, Warid Pakistan and Mobilink (previously known as Pakistan Mobile Communications Ltd, PMCL) – exemption from paying PKR47 billion (USD489.72 million) in back taxes that the operators owed to state coffers.

Further, Shah told the committee that a ‘leading telecommunication company’ was earning PKR80 billion-PKR85 billion annually, but had paid only PKR2.5 billion tax over the past five years. The former LTU head claimed that telcos were involved in ‘massive tax evasion’ through transfer pricing manipulation, inflating the cost of importing machinery to show a loss. As previously noted by CommsUpdate, the telcos were accused of evading PKR47 billion in taxes on interconnection charges and excise duties. However, Shah added that if the completed tax record was made available, the total evaded tax would exceed PKR100 billion. Pursuing the investigation further, the committee has instructed the PTA make available all relevant records from all the telcos.