It is common knowledge that the wealthy in Pakistan pay the least taxes and get most of the benefits.
To ensure this trend, Under the Finance Act 2023, the government has revoked the FBR’s authority to impose mandatory “additional tax on certain income, profits, and gains” on individuals belonging to the elite class.
The act allows the government to decide who gets taxed instead of the FBR. This can be seen as a conflict of interest because most beneficiaries are either part of the government or are associated with them somehow.
What’s in the Finance Act 2023?
Finance Act 2023 introduced a new provision (99D. Additional tax on certain income, profits, and gains).
Beginning the tax-year 2023 and onwards, an additional tax will be levied on companies that have generated income, profits, or gains due to windfall income in any of the previous three tax years.
This tax will be imposed in addition to any existing taxes applicable under the provisions of the current ordinance.
The Federal Government has the authority to:
1. Specify the sector or sectors to which this section applies.
2. Determine the criteria for windfall income, profits, or gains, and the economic factors involved, including commodity price fluctuations or any sector of the economy and income differences, profits, or gains due to fluctuations in foreign currency.
3. Set a rate for the additional tax not exceeding 50 percent of such income, profits, or gains.
4. Establish the scope, timing, and payment details of the tax payable under this section, with specific conditions outlined in the notification.
5. Grant exemptions to individuals or groups, or certain types of income, from the application of this section, subject to specified conditions stated in the notification.
The notification issued under this section by the Federal Government must be presented to the National Assembly within ninety days of its issuance or by the 30th day of June of the financial year, whichever comes earlier.
