Karachi, August 22, 2023 – The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has issued a stern demand to tax authorities for the immediate withdrawal of Section 7E across the entire country.
Muhammad Suleman Chawla, Acting President of FPCCI, stated that the business, industry, and trade community of Pakistan firmly believe that Section 7E, introduced in the Income Tax Ordinance (ITO) 2001, has proven to be not only disruptive to economic activities but also ineffective, generating only PKR 10 billion in its first year of implementation.
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Chawla highlighted that the impact extends beyond financial numbers, with a significant loss in investor confidence, both domestically and from overseas Pakistanis, particularly in the real estate sector.
He pointed out that following a Lahore High Court (LHC) judgment, the Federal Board of Revenue (FBR) issued Circular No. 3 of 2023-24 dated August 15, 2023, stating that Section 7E would not apply to cases under the jurisdiction of LHC, namely Punjab.
Chawla emphasized that this is an opportune moment for the government to address the long-standing concerns of the business community regarding Section 7E. He called upon Ms. Shamshad Akhtar, the caretaker federal minister for finance & revenue, to instruct the FBR to withdraw Section 7E for the rest of the country, which would be seen as a goodwill gesture toward the business community.
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The removal of Section 7E from ITO 2001 is seen as a concrete step to boost confidence among stakeholders in the country’s economy and demonstrate that their concerns are being heard by the government.
Chawla also highlighted the recent increase in withholding tax (WHT) rates on the purchase and sale of immovable properties, from 1 percent to 3 percent under Sections 236C (Advance Tax on sale or transfer of immovable Property) and 236K (Advance Tax on purchase or transfer of immovable property), respectively. He described this as unfair and counterproductive and called for its immediate withdrawal to prevent further damage.
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Moreover, Chawla questioned the rationale and effectiveness of repeatedly issuing thousands of income tax notices under Section 7E to filers, which often resulted in harassment and psychological pressure. He stressed the need to facilitate, reward, and acknowledge income tax filers and law-abiding citizens instead of imposing undue burdens to meet revenue collection targets.
Chawla strongly demanded the immediate withdrawal of all existing show cause notices under Section 7E, where a recovery equivalent to 5% of the fair market value has been demanded for capital assets and immovable properties.
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He further explained that Section 7E imposes an income tax on immovable properties, a matter constitutionally under provincial jurisdiction, and raises concerns of double taxation. The real estate and construction sector would be directly impacted by Section 7E, resulting in unemployment and a decline in commercial and economic activities, affecting over 70 allied sectors and industries connected to construction.
The FPCCI’s demand for the withdrawal of Section 7E reflects ongoing concerns about its impact on the business and investment climate in Pakistan.
