The Lahore High Court (LHC) on Thursday conditionally suspended super tax of up to 10 per cent for companies whose accounting year ended in December last year but were still required to pay it. , which was exposing half-baked policies that tarnished the government’s image.
The court provided interim relief only to companies whose tax year ended in December 2021.
However, they had to pay super tax even though their accounts were closed.
Majority of Pakistani companies have closed their accounting year in December.
The Muslim League-N-led coalition government has imposed a super tax of 1 to 10 percent to raise an additional Rs 80 billion every year.
“The FBR (Federal Board of Revenue) is directed to allow the petitioners in this and related petitions to file their returns excluding tax under section 4C of the Ordinance of 2001, subject to exemption Post-dated checks of an amount of Rs. should be deposited under Section 4C,” read the LHC’s interim order.
The government had inserted Section 4C in the Income Tax Ordinance to collect super tax from 13 specific sectors.
The LHC clarified on the request of the petitioners that the checks would be encashed on the directions of the court or subject to the decision of this and the connected petitions.
Services Industries Ltd., Ibrahim Fibers Ltd., Ibrahim Holdings Pvt. Ltd., Heinon Laboratories Ltd., Lotte Akhtar Beverages Pvt. Ltd. and Total Parko Pakistan Ltd. have challenged the levy of super tax in the Lahore High Court through their lawyers.
The hearing of the case was adjourned till October 20.
In his budget wind-up speech, former finance minister Miftah Ismail had announced a supertax of 1 to 10 percent on large firms to collect an additional Rs 80 billion.
The government had selected 13 sectors to receive windfall benefits, bringing their total income tax rate to 39 percent.
The government imposed a super tax on banks. cement iron and steel; Sugar; oil and gas; Fertilizer LNG Terminals; Textile vehicle; Cigarette; beverages; Chemicals and airlines.
This is the third major relief granted by any court in the last one week, which could adversely affect revenues of Rs 125 billion.
Court cases have exposed half-baked tax measures, which in some cases have caused embarrassment to the government.
The Lahore High Court this week also allowed the real estate sector to request an extension in submitting annual income tax returns.
This was in case he suffered from 20% deemed income tax.
Similarly, the Sindh High Court had last week allowed banks to file annual income tax returns based on the old Advance to Deposit Ratio (ADR).
FBR took these two measures to collect additional taxes worth Rs 45 billion in the budget.
The LHC on Thursday observed that the petitions are considered only to the extent of retrospective effect of Section 4C against past and closed transactions.
“In determining whether the petitioners’ case falls within the period past and closed transactions, the prima facie case of law is clear that a previous enactment, in clear words, disturbs past and closed transactions. will not, because the rights of the parties are not only secured but enforced,” read the order.
The court granted the relief a day before the statutory deadline for filing annual income tax returns along with the wealth statement.
So far more than 1.5 million individuals, Association of Persons (AOPs) and companies have filed annual tax returns.
They are barely 40 percent of the taxpayers who filed their returns last year – 2021.
Data compiled by the FBR shows that around 4,600 companies have filed their annual returns so far.
Of these, 3,750 filed zero returns. A zero return means that the companies did not do any business during the year. One of the reasons for the low number of returns submitted by companies is that many companies end their financial year in December as opposed to the usual July-June cycle.
However, the number of companies filing returns has dropped significantly compared to the previous tax year when over 67,000 firms submitted them to the FBR.
The proportion of companies filing returns this year was less than 7% compared to last year.
The decision of the Lahore High Court came on a day when the new Finance Minister Ishaq Dar visited the FBR for the first time in five years along with former Bureau Chairman and State Bank Governor Tariq Bajwa. Tariq was active with the finance minister on Thursday.
During his first interaction with the taxmen, Dar is said to have expressed his dismay at the FBR’s reluctance to provide his tax records to the courts.
This was when he was facing court and media trials.
Dar has filed all his income tax returns since the beginning of his professional career, but the tax administration did not provide the information on time, which led to his media trial at the time.
Dar said that when no one is speaking the truth and the media is not allowed to give their statements, at least the FBR officials should have spoken the truth.
According to a statement issued by the finance ministry, current FBR chairman Asim Ahmed assured the finance minister that the bureau would achieve the quarterly target.
The FBR needs to collect Rs 1.61 trillion in taxes and by Thursday evening it had managed to collect Rs 1.54 trillion, needing to collect another Rs 70 billion yesterday.
