IHC stays 40pc windfall tax on banks

The Islamabad High Court (IHC) on Wednesday temporarily suspended a one-off 40 per cent tax imposed by the government earlier this month on bank profits reaped from foreign exchange transactions in the past two years. The court has suspended a statutory regulatory order (SRO) in this regard until Dec 8. According to the Prime Minister’s Office (PMO), the cabinet approved a proposal of the Federal Board of Revenue (FBR), which said the Finance Act 2023 introduced Section 99D to the Income Tax Ordinance 2021 to enforce the imposition of the tax on windfall profits made by banks. The federal cabinet’s approval of the windfall tax came after strong criticism of banks that they had earned a hefty Rs110 billion in profits in 2021 and 2022 from the speculative rupee-dollar trade. The decision was not in line with analysts’ expectations as most considered the tax imposition less likely. The tax could help the government to generate over Rs40bn.