The Islamabad High Court has prohibited the government from blocking the mobile phone SIMs of individuals who have not filed their taxes, and has issued a stay order on the petition filed by a private company until May 27.
During the hearing presided over by IHC Chief Justice Aamer Farooq, Salman Akram Raja, representing Zong, argued that the recent amendment to the law contradicted Article 18 of the Constitution, which guarantees freedom of trade, business, or profession.
This ruling deals a significant setback to the federal government’s efforts to broaden the tax base, particularly in light of concerns expressed by the Global System for Mobile Communications Association regarding the decision.
Earlier this month, the Federal Board of Revenue (FBR) had directed all telecom operators to block SIMs belonging to individuals who had not filed their taxes by May 15, 2024.
In the preceding month, the FBR had instructed the Pakistan Telecommunication Authority and telecom operators to block 506,671 mobile phone SIMs belonging to non-filers.
Sources indicate that telecommunication operators have agreed to manually block the SIM cards in smaller batches. Instead of imposing penalties on over 570,000 tax evaders, the FBR has opted to impose an additional withholding tax of 90% on them.
This additional withholding tax of 90% will remain in effect until the tax evaders submit their income tax returns. For instance, if a tax evader reloads a balance of Rs100, Rs90 will be deducted by the FBR.
Furthermore, if mobile phone companies are unable to obtain income tax returns from these tax evaders despite blocking their SIM cards, the individuals will be liable to pay an additional 90% tax if they activate another SIM card.
Additional taxes will be levied on tax evaders for each reload of their SIM cards, as well as on their mobile phone and data usage.
