The Pakistan Broadcasters Association (PBA) has written a letter to the government informing about likely favour given to ARY Group to let its TV channel avoid heavy taxes.
According to Geo News report, an exemption certificate on airtime/content — believed by the Federal Board of Revenue (FBR) to be worth hundreds of millions of rupees — has opened a Pandora’s box after the PBA wrote to the government to complain that if such an incentive was provided to ARY, other media houses should be given similar tax breaks and that billions of rupees in taxes paid since 2013 should be adjusted against their future liabilities.
The letter has been addressed to Adviser to the PM on Finance and Revenue Dr Hafeez Shaikh and acting Chairman FBR Nausheen Javaid Amjad.
Hoodwinking the authorities?
Earlier, the FBR had served a notice to ARY Communications Limited (ARY) with a tax demand of Rs992 million.
The FBR had alleged that ARY evaded tens of millions in taxes through misrepresentation, concealment and misuse of tax exemptions, causing a substantial loss to the national exchequer.
An FBR investigation had found that an offshore company, ARY FZLLC, undertook transactions with two other companies, ARY COMM and ARY Films and TV Productions Pvt, which, by virtue of Section 85 of the Income Tax Ordinance, 2001, were its associates.
As per the investigation, the tripartite agreement was utilised to allow the three companies to settle their receivables and payables in Pakistan on behalf of ARY FZLLC and avoid taxes in the process.
The investigation further stated that the taxpayer company, in the garb of exempted payments, also remitted payments against the cost of production and services, which were added under a single cost of “transmission costs” without deduction of relevant tax as is required under Pakistani law.
The FBR was of the view that the media house had claimed incorrect exemptions and that the amount was liable to be taxed in Pakistan.
ARY Communications, in its defence, stated that the FBR had not made correct cost comparisons and unfairly compared ARY with other media companies, further stating that its costs are not inflated even if the costs are to a related party. It stated that it had a different business model compared to the other companies.