SC gives interim relief against deemed income tax on real estate.

ISLAMABAD -- The Supreme Court of Pakistan on Wednesday granted interim relief against the 20% deemed income tax on real estate, which will partially dent revenue collection, as taxmen face a gigantic task of collecting Rs560 billion in one week to achieve the nine-month revenue target.

Headed by Chief Justice of Pakistan Justice Umar Ata Bandial, a special bench allowed taxpayers to pay only 50% of the assessed deemed income tax until final decision was made by the apex court.

The court made some sharp remarks about the performance of Federal Board of Revenue (FBR) and its focus on an already limited taxpayer base to achieve targets.

The apex court barred the FBR from taking any adverse action against the taxpayers, if they deposited half of the assessed tax, according to the interim decision.

Faisal Siddiqi advocate represented the petitioners in the court, which also inquired from the FBR about the constitutional mandate to slap taxes in an area which was within provincial domain.

Realty and manufacturing sectors have filed petitions against Section 7E that the government introduced in June last year to impose taxes on people who derived income equal to 5% of the fair market value of capital assets situated in Pakistan, who will be charged tax at the rate of 20%.

The FBR says the effective tax rate is 1%, aimed at collecting an additional revenue of Rs15 billion. Initially, the estimate was Rs25 billion, which the FBR reduced after the government excluded some sectors from the scope of the tax, which was also contested by the petitioners, terming it discriminatory legislation.

For the current fiscal year, the government has set the annual tax collection target of Rs7.640 trillion for the FBR. For the July-March period, the target is Rs5.43 trillion, but the FBR collected Rs4.87 trillion as of Wednesday.

This leaves it with a balance of over Rs560 billion, which it has to collect in the remaining six working days with an average of Rs94 billion a day. A major tax injection is expected on Friday and Monday.

During the first eight months, the FBR claimed that it sustained a Rs213 billion shortfall but the Ministry of Finance and the Accountant General for Pakistan Revenue data suggested a shortfall of Rs233 billion.

Any further shortfall will bring performance of the FBR under critical review. It is struggling to achieve the targets despite a Rs170 billion mini-budget and record inflation of 31.5%. But so far the FBR has been unable to cash...