Finance Act challenged: Taxpayers pay Rs3bn court fees for 6,000 petitions against FBR

ISLAMABAD: Taxpayers have paid huge amounts of Rs2.5 billion to Rs3 billion as fees for filing 6,000 petitions in different courts against the Federal Board of Revenue’s taxation measures taken through the Finance Act 2022. These measures include imposition of super tax, Capital Value Tax (CVT) on foreign assets and tax on deemed income basis.

Sources told Business Recorder Saturday the FBR has estimated that around Rs2.5 billion to Rs3 billion has been paid as fee to the tax lawyers, tax advisers and consultants for fighting the cases against the FBR in courts against the CVT on foreign assets, super tax, and tax on deemed income basis. If all petitions are totaled which were filed at various judicial fora by different individuals as well as companies etc, the total comes to around 6,000. The FBR is also verifying the payments of such huge amount of fees from different sources.

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The CVT on foreign assets was due by December 15, 2022, and the tax on deemed income basis by December 31, 2022. The Supreme Court had directed high-income earners to pay 50 per cent of the due liability with regard to the super tax. The super tax was imposed on the profits of wealthy corporations whose earnings exceeded Rs150 million through the Finance Act, 2022. The government had inserted Section 4C in the Income Tax Ordinance to charge the super tax from 13 specific sectors. The government imposed the super tax on banks, cement, iron and steel, sugar, oil and gas, fertilisers, LNG terminals, textile, automobile, cigarettes, beverages, chemicals, and airlines.

Similarly, the Sindh High Court (SHC) had already dismissed the petitions challenging the levy of tax on foreign assets of a resident individual as defined in Section 8(13) (c) of the Finance Act, 2022. In the past, the judgment of a division bench of the SHC said: “We do not see any justifiable reason to declare the provisions of Section 8 of the Finance Act, 2022, as ultra vires to the Constitution; hence all these petitions are hereby dismissed.” 172 petitioners had challenged vires of Section 8 of the Finance Act, 2022, whereby, a tax has been levied on the value of assets at the rates specified in the First Schedule to that Section for the tax year 2022 and onwards, whereas, the present challenge of the petitioners is in respect of and only to the extent of Section 8(2)(b), ie, levy of tax on foreign assets of a resident individual as defined in Section 8(13) (c) which includes moveable and immoveable properties. The main challenge was that the Parliament has no legislative competence to levy such a tax on foreign assets of the petitioners.

The SHC has dismissed petitions filed against imposition of tax on immovable properties on “deemed income basis” under section 7E of Income Tax Ordinance, 2001.

Copyright Business Recorder, 2023