In a significant development, the Islamabad High Court (IHC) suspended the imposition of a 40% additional tax on windfall income for banks, as per SRO 1588(1)/2023 issued by the Federal Board of Revenue (FBR).
Justice Sardar Ejaz Khan issued a written order on Wednesday, citing the need for further examination of the taxation matter.
The IHC has also issued notices to the FBR and the Attorney General of Pakistan, seeking their comments by December 8, 2023.
The court, in response to a petition filed by Askari Bank against the additional tax, noted that taxation matters may not fall under the jurisdiction of the caretaker government.
According to the petitioner's counsel, the notification for the additional tax should have been presented to the National Assembly. Consequently, the implementation of the 40% additional tax on windfall income is suspended until the next hearing, scheduled for December 8.
The federal cabinet had previously approved the imposition of a 40% tax on extraordinary profits earned by banks, particularly from foreign exchange transactions in 2021 and 2022.
Sources revealed that in 2022, banks reported a profit of Rs. 80.92 billion, while the profit for the year 2021 stood at Rs. 42 billion.
The court's decision to suspend the additional tax brings relief to the banking sector, which had expressed concerns over the significant financial impact of the imposed tax.
The unfolding legal proceedings will undoubtedly shape the future landscape of taxation policies, emphasizing the delicate balance between revenue generation and industry sustainability.
