ISLAMABAD: The Federal Board of Revenue (FBR) has constituted an 18-member joint working group (JWG) with three main telecom operators to continue the manual blockage of non-filers, effectively ending the deadlock over implementing the tax machinery’s effort to widen the tax base.

The constitution of the committee came in the wake of a meeting between Finance Min­ister Mohammad Auran­gzeb and representatives of telecom operators on May 12. However, one of the telecom operators, Zong, moved the Islamabad High Court against the Income Tax General Order No 1 (ITGO-No1), which required all operators to block SIMs of non-filers.

The JWG has representat­ives from the Pakistan Teleco­m­munication Authority (PTA), Ufone, Telenor Pakistan, and Jazz. However, Zong has no representation on the JWG, according to the FBR notification issued on Friday.

The telecom operators have agreed with the FBR to initiate the manual blocking process in small batches of non-filers as part of a decision to implement ITGO-No1, issued under Section 114-B of the Income Tax Ordinance, 2001. Contrary to the understanding, Zong filed a petition challenging ITGO-No1 with the IHC on May 14, while the three operators began implementation by blocking non-filers’ SIMs, a senior tax official told Dawn on Friday.

IHC clarifies it has only restrained govt from acting against telcos, no stay on FBR move

“We have confirmation from the three telecom operators of blocking of SIMs,” the official said, adding that only Zong has challenged the FBR decision. The attorney general’s office has already been requested to look into the issue, added the tax official.

According to the FBR notification, the JWG was constituted to enforce the ITGO-No1 of 2024 and to streamline the process of blockage of SIMs of non-filers by law. It further said the JWG will serve as a platform for collaboration and communication between the concerned parties to address any challenges and facilitate the smooth implementation of the ITGO-No1 to block the SIMs of non-filers listed in the order.

On April 30, the FBR released a comprehensive list of 506,671 individuals who failed to file their tax returns for 2023. As a penalty, their mobile phone SIMs will be promptly blocked. However, telecom providers objected to the decision and delayed its execution, which was made under an act of parliament.

The JWG will consist of Mir Badshah Wazir Khan (member, inland revenue-operations), Arshad Nawaz Chheena (chief, revenue operations), Naeem Hassan (commissioner, IR LTO Islamabad), Khalid Sultan (additional commissioner, IR LTO Islamabad), and Sadaf Ihsan (second secretary, IR-operations).

JWG’s PTA representatives are Kashif Ghafoor (director of enforcement wireless) and Sohail Mehmood (assistant director of regulations). Ufone representatives include Jawad Habib, Siraj Alam, Faisal Ali, and Ali Amjad. Raza Zulfiqar, Syed Ali Yasir Rizvi, and Rashid Khan represent Telenor Pakistan, while Jazz’s representatives are Ali Faisal, Omar Saeed, Shaher Yar Khan, and Rohail Ursani.

The FBR has identified 2.4 million potential taxpayers, who did not exist on the tax rolls. Notices were subsequently issued to these individuals. The FBR selected over half a million individuals out of the 2.4m for SIM blockade based on one criterion: they must have declared taxable income in one of the past three years and did not file their returns for tax year 2023.

According to the Active Tax­payers List, the FBR rec­e­ived 4.2m taxpayers until March 1, as against 3.8m returns received over the corresponding period of last year, showing a marginal increase during the period under review.

The chief justice was hearing an application filed by the federal government for the vacation of the stay order against the blocking of SIMs of non-filers. Attorney Gene­ral Mansoor Usman Awan appeared before the court and requested that the stay order be vacated. Justice Farooq remarked that the court had never stopped SIMs blocking, adding that it had restrained the federal government from taking any coercive action against cellular operators. Awan requested the court to vacate this stay order as well.

‘Coercive action’ against telcos

On the other hand, IHC Chief Justice Aamer Farooq clarified on Friday that the court had not issued a stay order against the blocking of non-filers’ SIMs, rather had restrained the federal government from taking any coercive measures against cellular operators.

Justice Farooq, however, issued a notice to the cellular company on the government’s application and sought a reply by May 22. Earlier last week, Justice Farooq, while hearing a petition filed by Zong, had sought a response from the Federal Board of Revenue by May 27.

The directives were issued by CJ Farooq after the initial hearing of a petition filed by Zong, one of the four telecom operators in the country. The court order came against the backdrop of reports that telecom companies had agreed to block the connections of non-filers as demanded by the tax watchdog. Initially, these companies, as well as the regulator, had expressed reservations, calling the move “counter-productive” and vulnerable to litigation.

Barrister Salman Akram Raja, representing Zong, referred to the ITGO-No1 issued by the FBR and argued that the addition of Section 114B of the Income Tax Ordinance 2001 to the Finance Act 2022 violated the basic right of freedom of business enshrined in Article 18, adding that there could be no legislation contrary to the fundamental rights. He said the government could not gain the power to block people’s SIM cards by amending the law.

Section 114B grants the FBR powers to issue ITGO concerning individuals not appearing on the active taxpayers’ list, to block their mobile phones or SIMs, and discontinue electricity and gas connections.

The controversy had risen when the FBR issued the ITGO on April 30, releasing a list of 506,671 individuals who failed to file their tax returns for 2023. PTCL, the parent company of Ufone, announced that the company was in close coordination with the PTA to address the issue effectively and responsibly.

Malik Asad also contributed to this report

Published in Dawn, May 18th, 2024