Karachi, November 16, 2023 –Section 99D of the Income Tax Ordinance, 2001, has granted the federal government the authority to levy an additional tax on windfall profits across various sectors of the economy, according to sources within the Federal Board of Revenue (FBR).
This empowerment, as explained by FBR sources, extends beyond the recent imposition of a windfall tax on banks’ income from foreign exchange transactions. The government is now equipped to identify and apply the windfall tax to specific sectors, underscoring the versatility of Section 99D.
Inserted into the Income Tax Ordinance, 2001, through amendments in the Finance Act of 2023, Section 99D outlines the conditions and parameters for the imposition of additional tax on income, profits, and gains resulting from economic factors causing windfall gains.
Section 99D Overview:
Subsection (1):
Notwithstanding existing laws, an additional tax shall be imposed on companies with income, profit, or gains arising from economic factors leading to windfall income, profits, or gains in the last three tax years preceding the tax year 2023 and onwards.
Subsection (2):
The Federal Government, through official Gazette notifications, has the authority to:
• (a) Specify sectors for the application of this section.
• (b) Determine windfall income, profits, or gains and economic factors, including international price fluctuations impacting commodity prices in Pakistan or any sector, as well as differences in income due to foreign currency fluctuation.
• (c) Set rates not exceeding fifty percent of the income, profits, or gains.
• (d) Define the scope, time, and payment of taxes under this section, specifying conditions.
• (e) Exempt individuals or classes of individuals, as well as income or classes of income, from the application of this section, subject to specified conditions.
Subsection (3):
The Federal Government must present the notification issued under this section before the National Assembly within ninety days of issuance or by the 30th day of June of the financial year, whichever comes earlier.
This newfound authority provides the government with a dynamic tool to address windfall gains in a targeted manner, contributing to fiscal policies aimed at economic stability and revenue generation. As the government navigates economic challenges, Section 99D offers flexibility and responsiveness to identify and regulate sectors experiencing windfall gains, ensuring a fair and balanced approach to taxation.
In the ever-evolving economic landscape, the implementation of Section 99D demonstrates the government’s commitment to adapt and address emerging financial scenarios, contributing to a robust and adaptive fiscal framework for the nation’s economic well-being.
