The Finance Bill 2023 has introduced a new section, 99D, to the Income Tax Ordinance, 2001, enabling the government to impose an additional tax on certain income, profits, and gains.
This provision aims to target individuals or classes of persons who have experienced unexpected windfall gains resulting from various economic factors. The new tax will be applicable for the preceding five tax years from tax year 2023 onwards.
READ MORE: FBR Empowered to Recover Outstanding Liabilities under Other Laws
Under the amended ordinance, the government is granted the authority to identify specific economic factors that contribute to these unexpected gains. Such factors may include international price fluctuations affecting commodity prices in Pakistan, shifts within specific sectors of the economy, or variances in income, profit, or gains due to foreign currency fluctuations. The government will provide a detailed list of these factors through an official notification published in the Gazette.
The rate of the additional tax will be determined by the Federal Government and will not exceed fifty percent of the identified income, profits, or gains. This rate has been carefully selected to strike a balance between revenue generation and the economic well-being of taxpayers. It is important to note that the existing tax charges, as stipulated by the Ordinance, will continue to apply in addition to this new tax.
READ MORE: FBR Exempts Foreign Inflows Up To $100,000 From Scrutiny
The government aims to ensure transparency and clarity in the implementation of this tax provision by outlining the scope, time, and payment procedures in the notification. This includes specifying the conditions and methods of tax payment. By doing so, the government intends to facilitate effective compliance among taxpayers.
While introducing the additional tax, the government acknowledges that certain individuals or classes of persons may require exemptions. Therefore, the government retains the authority to exempt specific individuals or classes of persons, as well as certain types of income, from the application of this section. The exemptions will be subject to conditions determined by the government.
READ MORE: Pakistan mulls relaxing disclosure limit of foreign exchange in local currency
The introduction of this additional tax is part of the government’s broader objective to establish a more equitable tax system and address income disparities resulting from unexpected windfalls. By targeting those who have experienced significant gains due to economic factors, the government aims to generate additional revenue while minimizing the burden on ordinary taxpayers.
It is crucial for taxpayers and relevant stakeholders to stay informed about the specific economic factors identified by the government, as well as the conditions and procedures for tax payment and exemptions. This will enable them to comply with the new tax provision effectively.
READ MORE: Regulatory Duty on Second-Hand Clothing Abolished in Finance Bill 2023
