Punjab revenue body serves notices on Google, Facebook

LAHORE: The Punjab Revenue Authority (PRA) has again served notices on Google and Facebook to register with the authority under the Punjab Sales Tax Services Act 2012.

According to a PRA spokesperson, the notices were served on both companies' head offices located in the US and Singapore through registered mails. Earlier, during the last fiscal year, the same notices were also served. However, both companies refused to register with the PRA taking the plea that they did not fall in the jurisdiction of the authority.

One of the companies, through its local counsel, challenged the PRA's authority to collect tax from it. The other company's official has challenged the notice on the plea that their place of business is not located in the jurisdiction of the PRA.

Now, the notices have again been issued to Google and Facebook to register with PRA under Punjab Sales Tax Services Act 2012. Though both companies plead that they do not fall under any criteria of this Act as neither they have any office nor employee in Pakistan, but according to Punjab Sales Tax Act 2012, both companies’ revenue are considered taxable as they have been carrying out economic activity in Pakistan via virtual presence, website and web portal.

The official said the PRA was facing this challenge from a number of potential tax clients. However, these clients were avoiding to come into the tax net. In such a situation, the government has decided to amend the Punjab Sales Tax Act in budget 2017.

Under the new amendment, the government has explained the definition of jurisdiction in order to bring all the services providers under the tax net. Under the new definition, the scope of the expression ‘place of business’ is proposed to be broadened to include persons carrying out economic activity in Punjab through virtual presence, website, web portal, any other form of E-commerce or through liaison offices.

Through such an amendment, the responsibility to pay tax is seemingly intended to be shifted on to the provider of service. The PRA official said an effort is made to bring them in tax net; now after their reply the case will move forward. He said a similar situation was also faced by the PRA in the case of the famous taxi service platforms: Uber and Careem.

He said one has challenged the PRA authority to tax it while other has registered itself with PRA but not a single penny of tax was deposited to provincial exchequer so far. 

Only nil returns were filed by the company through its counsel, he mentioned. Talking about the further course of action, the official said the PRA is anticipating a good amount of tax from both Google and Facebook on the basis of their services and users in Pakistan. The PRA has other options to bring these companies in tax net by suspending their services in the jurisdiction of the province in case of non-compliance of orders, he added.

Originally published in The News