The Federal Tax Ombudsman (FTO) has urged the Federal Board of Revenue (FBR) to investigate the pattern of lower tax deductions for salaried individuals by telecom companies.
A new order issued by the FTO follows a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000, regarding the issuance of incorrect tax deduction certificates by a telecom company.
The complainant, a salaried taxpayer, has been using telecom internet services for several years and has consistently received tax deduction certificates according to the Income Tax Ordinance, 2001, showing 15% of the total amount paid to the company. However, this year, the company failed to issue the correct tax deduction certificate despite the complainant’s regular payments.
The complainant approached the FBR for assistance, but no resolution was provided, prompting the filing of the complaint. The telecom company explained that the issue arose due to a structural adjustment in their billing system, separating the Internet Monthly Line Rent (MLR) into two components: Internet and Infrastructure (Infra).
The company clarified that the infrastructure component is not subject to Withholding Tax (WHT), leading to a lower taxable amount and a reduced total on the tax certificate.
Despite the company’s explanation, the FTO pointed out that the telecom company failed to provide a legal basis for the change in billing and the exclusion of the infrastructure component from tax withholding. The FTO expressed concern that other telecom companies might follow a similar approach and criticized the FBR for its lack of response to the taxpayer’s alert, calling it maladministration.
The FTO has directed FBR Members of IR-Operations and Policy to investigate the issue and report their findings within 45 days. The FTO emphasized that the FBR must take action to ensure tax deductions are correctly applied and in accordance with the law.
