The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has called on the government to abolish Section 7E of the Income Tax Ordinance, 2001.
In a statement issued by FPCCI Acting President Suleman Chawla on Wednesday, it was highlighted that the business, industry, and trade community of Pakistan strongly believe that Section 7E, introduced in the Income Tax Ordinance (ITO) 2001 through the Finance Bill 2022, has had adverse effects on economic activities. Furthermore, it has been deemed ineffective, generating a mere Rs9 billion in the first 10 months of implementation.
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Chawla emphasized that the upcoming federal budget for the year 2023-2024 presents an opportune time to address the longstanding concerns of the business community. He called upon Ishaq Dar, the federal minister for finance and revenue, to seize this opportunity and gain the goodwill of the business community by abolishing Section 7E in the ITO 2001. Such a measure would serve as a tangible step towards building confidence among the stakeholders of the country’s economy and make them feel heard by their government.
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Questioning the rationale and efficacy of issuing thousands of income tax notices to filers, Chawla expressed concerns over the harassment and psychological pressures faced by taxpayers due to unfair, arm-twisting, ill-prepared, and copy-paste notices. He emphasized the need to facilitate, reward, and acknowledge income tax filers and law-abiding citizens, as is done in other parts of the world, rather than burdening them further to meet revenue collection targets.
The acting FPCCI Chief pointed out that the Income Tax Department of the Federal Board of Revenue (FBR) seems to be unaware of the ground realities. Introducing a new provision, such as Section 7E, in the Income Tax Ordinance 2001 would only intensify the burden on existing taxpayers instead of exploring new avenues and broadening the tax base.
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Suleman Chawla strongly demanded the immediate withdrawal of all show cause notices issued under Section 7E. These notices demand a recovery of deemed income equivalent to 5% of the fair market value for capital assets and immovable properties held by individuals. Chawla stressed that this provision unfairly targets individuals and imposes double taxation, especially since the taxation of immovable properties is constitutionally a provincial subject.
Zakaria Usman, Convener of FPCCI’s Budget Advisory Council, further explained that Section 7E levies income tax on immovable properties, directly impacting the real estate and construction sector. This provision not only poses a threat of unemployment but also hampers commercial and economic activities, as more than 70 allied sectors and industries associated with the construction industry would suffer.
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In light of these concerns, FPCCI has unequivocally demanded the exclusion of Section 7E from the budget-making exercise. Additionally, FPCCI urges an immediate withdrawal of all notices issued under this section through an administrative order.
The FPCCI’s call to abolish Section 7E of the Income Tax Ordinance reflects the concerns of the business community and highlights the need for a more favorable environment for economic activities in Pakistan.