ISLAMABAD: The Federal Board of Revenue (FBR) recovered Rs23 billion from 16 major banks in a single day on February 21, 2025, following a Sindh High Court (SHC) ruling that upheld the Windfall Tax under Section 99D of the Income Tax Ordinance, 2001.
The decision marked a major step in the government’s strategy to ensure tax compliance from the corporate sector.
According to sources cited by The News, this recovery was the result of a coordinated effort led by Prime Minister Shehbaz Sharif, with active involvement from the State Bank of Pakistan (SBP) governor, Attorney General for Pakistan, FBR chairman, and a legal team. The ruling, issued by the SHC’s Constitutional Bench, dismissed financial sector petitions challenging the Windfall Tax, allowing the government to swiftly secure the revenue.
The Windfall Tax, introduced via the Finance Act 2023, enables the government to tax up to 50% of unexpected excessive profits generated due to economic fluctuations. Between 2021 and 2023, banks made significant gains by capitalizing on currency depreciation, as the Pakistani rupee fell from Rs168 per US dollar in 2020 to Rs286 in 2023, widening the gap between interbank and open market exchange rates.
In response, the government imposed a 40% tax on foreign exchange income through SRO 1588(I)/2023 in November 2023.
Windfall taxes have been implemented in various countries, including the US, UK, Italy, Romania, Greece, Spain, and Poland. Following the successful enforcement of this tax, the government is now shifting focus to recovering stalled revenues from other elite-focused taxes, including Super Tax (Section 4B & 4C), tax on undistributed reserves, Capital Value Tax (CVT) on foreign assets, tax on deemed income from unutilized real estate, and tax on inter-corporate dividends.
Legal reforms under the 26th Constitutional Amendment, which led to the establishment of Constitutional Benches in the Supreme Court and High Courts, have expedited tax-related cases, preventing prolonged legal challenges. The government is also allocating additional legal resources to strengthen its position in court battles against tax evasion.
With Rs23 billion recovered within 24 hours of the SHC ruling, the FBR views this as a major shift in Pakistan’s taxation framework, aiming to ensure that corporate taxation is enforced fairly while preventing tax burdens from disproportionately impacting the lower and middle classes.
