ISLAMABAD - The Supreme Court of Pakistan’s decision of restoring taxes on mobile phone cards would help the Federal Board of Revenue (FBR) in reaching nearer to its collection target during ongoing fiscal year.

The FBR is struggling to meet its annual tax collection target of Rs4390 billion in present fiscal year due to the several reasons. In June 2018, the Supreme Court had suspended deduction of taxes on the top-up of prepaid cards by mobile phone service providers. However, the decision had dented FBR’s tax collection.

An official of the FBR informed The Nation that the Supreme Court’s decision to suspend tax on mobile phone cards led to a drop of around Rs35 billion in withholding tax collections during nine months (July to March) of the ongoing fiscal year. The FBR was facing shortfall of around Rs4.5 billion shortfall every month due to suspension of various taxes on mobile phone cards. The overall annual impact of the suspension of taxes was much higher, he added.

FBR struggling to meet its annual target of Rs4,390b

Another senior official informed that suspending taxes on mobile phone cards was estimated to cost the national exchequer a revenue loss of Rs155 billion at the federal and provincial level during entire ongoing fiscal year. However, the Supreme Court of Pakistan on Wednesday restored taxes on the mobile phone cards. The Supreme Court on Wednesday announced the restoration of all taxes charged by cellular service providers on mobile phone top-up cards. Chief Justice Asif Saeed Khosa read out the short order, saying the top court “would not interfere in the matters of public revenue and tax collection”. The court also withdrew the stay order placed on the collection of mobile phone taxes while wrapping up the suo motu case.

The apex court decision would help in increasing its taxes during remaining months of the fiscal year. “The decision will help in generating revenues. However, we will have to read the judgement of the Court whether the taxes were restored from now or from the previous dates,” the official commented.

The suspension of taxes on mobile cards was one of the reasons behind massive shortfall in tax collection during nine months of the current financial year. Revenue collection had reached Rs2.186 trillion during July to March period of the year 2018-19 posting a shortfall of Rs303 billion against the Rs2.488 trillion target set for the period. Other major reasons behind shortfall are relief given to the salaried class leading to Rs40.5b shortfall in income tax collection followed by Rs28.9b from contracts of development budgets at the federal and provincial levels during the months under review. Collections from petroleum products also dropped by around Rs 51 billion during the period under review whereas an additional Rs10.3 billion was also lost following the replacement of LNG imports with furnace oil owing to the difference of tax rates.