The Sindh High Court (SHC) struck down on Friday a 10% super tax imposed by the federal government earlier this year, terming it discriminatory. This move will deprive the government of almost Rs 247 billion of revenue.
Super tax is levied upon a certain class of taxpayers in the rates between 1% to 10% on income groups who earn at least Rs 150 million. It was first introduced after section 4B of the Income Tax Ordinance (ITO) of 2001 for the rehabilitation of displaced persons was introduced through the Finance Act of 2015. This year in 2022, another section 4C of the ITO of 2001 was introduced that imposed a super tax on high earning persons through Finance Act, 2022.
It included 13 sectors including beverages, automobiles, airlines, cement, chemicals, cigarette and tobacco, fertiliser, iron and steel, LNG terminal, oil marketing, oil refining, petroleum and gas exploration and production, pharmaceuticals, sugar and textiles, the rate of tax shall be 10% where the income exceeds Rs 300 million.
The SHC termed the government’s decision to charge 10% tax on 13 selected sectors as discriminatory.
The petitioners challenge the legality of section 4C of the ITO “upon grounds that the same unlawfully vitiates vested rights accrued in past and closed transactions; is discriminatory, confiscatory; demonstrably devoid of any intelligible differentia…”
At the start of financial year 2022-23, the government set a target to collect Rs 215 billion to Rs 247 billion with super taxes. The SHC order will now adversely impact the annual tax collection target of Rs 7.47 trillion. Out of Rs 247 billion, the FBR had estimated to collect Rs 180 billion in December, out Rs 87 billion were expected to be paid by the government owned companies.
It is reported that the FBR requested the finance minister to play his role in convincing the government-owned entities to pay 10% super tax. But that won’t be possible after the SHC’s decision.
