Illegality of advance tax

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THE Lahore High Court has declared unconstitutional the collection of advance tax from people who do not have taxable income.

It ordered that the collection of income tax is not allowed without estimating the income. The court issued the verdict on 22 petitions of low-income mobile phone users and against levy of Rs20,000 advance tax on booking of wedding halls.

Citizens have rightly been agitating against the advance or withholding tax as people who do not fall within the ambit of the tax net are unable to reclaim the tax so paid either for use of mobile phones, booking of marriage halls, sale/purchase of immovable property and passenger transport vehicles.

In theory, advance tax is adjustable at the time of filing an annual tax return but those who are not liable to pay tax or file the returns are deprived of their income so deducted at source.

The court has held that income tax was meant to be charged from citizens who were earning income whereas those not earning deserved to be compensated by the state.

Strangely enough, the Lahore High Court has not issued clear-cut instructions for stoppage of the practice and instead referred the matter to the Federal Board of Revenue (FBR) and Attorney-General for suitable amendments within 90 days.

As advance tax is unjust and exploitative in nature, we hope the Government would not challenge the verdict and instead modify the relevant laws and rules in the light of the decision of the court.

 

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