After admitting a petition against SRO 136(I)/2015 on higher rates of withholding tax for Non-filers, Lahore High Court (LHC) said through an order that since the Sub-section 3 of Section 159 of the Ordinance, 2001 has been deleted by the Finance Act 2015, therefore, this power does not vest in the Federal Board of Revenue (FBR) any more.
It is learnt that a petition filed by Waheed Shahzad stated that Mini Budget announced by the FBR through Notification S.R.O 136(I)/2015 dated 13.02.2015 introducing new Table in Part II of First Schedule to the Income Tax Ordinance, 2001, is simply nothing but exploiting the powers available with executives to fill the budgetary gaps by changing tax rates unlawfully without Parliamentary approval.
Under the SRO.136(I)/2015, the FBR has imposed higher rates of withholding taxes for importers and service providers, who are non-filers of income tax returns covering companies providing services, non-corporate service providers, importers of remeltable steel, potassic fertilisers, urea, pulses, commercial importers under SRO.125(I)/ 2011 and import of ships by ship breakers.
The petition added that in Pakistan there is no tax collection system but only "tax sharing" exists in which the exchequer is never a major beneficiary. By withdrawing tax measures or changing the tax regimes through Statutory Regulatory Orders (SROs), the FBR is involved in subverting the authority of the Parliament. Nowhere in the world, delegated power, is available to an executive authority to undo laws passed by Parliament through SROs. Tax liability of a person can only be determined/ altered/re-determined by the Parliament. The interpretation of law is the sole prerogative of the Courts with the Supreme Court having the final say in the matter. In Pakistan, over the years, FBR has surreptitiously usurped a significant part of the lawmaking powers of the Parliament and has resorted to arbitrary and incompetent lawmaking on its own by misusing provisions of the Ordinance. SROs are the devices employed by the tax machinery. The negative fallout on revenue mobilisation of these practices has been enormous and is one important reason why the tax to GDP ratio has deteriorated so significantly in recent years.
Article 162 of the Constitution debars even the National Assembly to grant tax exemptions or concessions without prior approval of the President. The power to issue SROs delegated to the Federal Government by the Parliament is blatant violation of law. How can the Parliament delegate a power which cannot be exercised by itself without the prior sanction of the President? Principle of "no taxation without representation", embodied in Article 77 read with Article 162 of the Constitution, is violated by the Respondents (tax department). Enforcement of Rule of Law determines the failure or success of a society. Article 77 of the Constitution says that "no tax shall be levied for the purposes of the Federation except by or under the authority of the Act of Parliament". LHC order states "The challenge in this petition is to the issuance of a notification dated 13.02.2015 SRO No 136(I)/2015 which has been issued under exercise of the powers conferred by subsection 3 of section 159 of the Income Tax Ordinance, 2001 (the Ordinance, 2001). By Finance Act, 2015 subsection 3 of section 159 of the Ordinance, 2001 has been deleted. Therefore, this power does not vest in the Federal Board of Revenue any more. In this view of the matter this petition has borne fruit has become infructuous, disposed of."
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