Jazz comes to blows with FBR over tax dispute

3 Nov 2020

Pakistani tax authority the Federal Board of Revenue (FBR) has faced a backlash from businesses after its Large Taxpayer Unit (LTU) sealed the head office of Pakistan Mobile Communications Limited (PMCL) – which offers services under the Jazz brand – last week over a PKR25.39 billion (USD158.5 million) tax dispute. The FBR issued a notice for the alleged unpaid dues on 28 October, demanding that the company submit the payment by 1pm the same day, with local news outlet Dawn citing Jazz employees as saying that the FBR teams took over the company’s headquarters just moments after serving the notice. In its order to seal the office, FBR accused Jazz of ‘refraining itself deliberately, dishonestly and without lawful excuse to discharge tax liability and thus causing huge loss to the national exchequer’. The FBR claims that the operator owes PKR22.03 billion in unpaid income tax for the 2018 financial year, plus an additional default surcharge of PKR3.36 billion. Jazz has challenged the claim, claiming that the demand relates to the proceeds from the sale of an asset from a holding company to a subsidiary and, as such, is not taxable.

Jazz CEO’s Aamir Hafeez has criticised the FBR’s decision to seal the cellco’s offices, characterising the action as ‘coercive and unfortunate’ and arguing that it tarnished the company’s reputation and undermined investor confidence. The CEO questioned the need or purpose for the move, as the company was not ‘running away anywhere’. The official went on: ‘There can be a difference of opinion over the interpretation of a tax dispute that can be resolved amicably by sitting with each other across a table but instead, the FBR decided to take an extreme step soon after our CEO met with the top leadership of the country to make a commitment for more foreign investment in Pakistan.’

Mr Hafeez was not alone in questioning the FBR’s decision, and the Overseas Investors Chamber of Commerce and Industry (OICCI) issued a statement expressing its ‘shock and dismay’ at the move. OICCI President Haroon Rashid was quoted as saying of the matter: ‘Without going into details of the legality of the tax demand, the manner in which officials of the LTU Islamabad acted in the matter, against one of the largest taxpayers in the country is most disappointing as this blatant action is a huge setback for government of Pakistan and OICCI’s joint efforts to attract foreign direct investment (FDI) in the country. Abrupt and unjustified action like this will go against the declared emphasis of the senior leadership of the government towards the ease of doing business and facilitating large inflow of FDI for harnessing the massive economic growth opportunities.’

The Islamabad High Court yesterday ordered the FBR to de-seal Jazz’s head office in an interval request. According to local news reports the court also found that the FBR did not give the cellco sufficient time to react to the issue, as the notice arrive less than an hour before the deadline stipulated in the demand.

Pakistan, Jazz (formerly Mobilink/Warid)