Rs90 tax on every Rs100 mobile balance: What is the reality?

News is circulating in local media that the Pakistani government is planning to impose a 90 percent tax on mobile phone balances in the upcoming budget, which will be presented in the National Assembly next month.

According to reports, the Federal Board of Revenue (FBR) has devised a new plan to collect taxes from non-filers as part of the government’s efforts to broaden the tax base in the country. The reports suggest that the FBR intends to deduct amounts from mobile phone balances as withholding tax. It has proposed imposing a 90 percent tax, as opposed to the previous 2.5 percent, on the balances of both prepaid and postpaid customers who are non-filers.

This means that telecom companies will deduct Rs. 90 out of every Rs. 100 balance and remit it to the tax authority until non-filers submit their returns.

Some experts argue that only individuals obligated to pay taxes but failing to do so, known as non-filers, will be subject to the 90 percent tax on mobile balances. However, other experts fear that the policy may also affect the general population.

FBR has yet to clarify its position on this matter. The situation will become clearer after the government presents the annual budget in the National Assembly next month, but the prevailing opinion is that imposing a 90 percent tax deduction on mobile phone balances is not feasible. We’ll see what steps the government takes.

Earlier this week, FBR issued lists of over 500,000 non-filers and instructed the Pakistan Telecommunication Authority (PTA) and telecom companies to block their SIMs. Reports indicate that the companies have blocked SIMs of 11,500 non-filers, with more expected to be blocked in the coming days.

FBR has set May 15 as the deadline for telecom companies to block SIMs of all non-filers. Previously, FBR identified millions of potential taxpayers who do not fulfill their tax obligations and issued notices to them. Out of these, over half a million individuals were selected for SIM blockade based on criteria related to taxable income declarations in previous years and non-filing for the tax year 2023.