The Islamabad High Court (IHC) has issued an order to temporarily halt the implementation of the 40% windfall tax on banks.
The Islamabad High Court (IHC) has issued a temporary suspension of the government’s imposition of a one-time 40 percent tax on bank profits originating from foreign exchange transactions in the past two years. This suspension, effective until December 8, is a response to a Statutory Regulatory Order (SRO) linked to Section 99D of the Income Tax Ordinance 2021, which was introduced through the Finance Act 2023.
The Prime Minister’s Office (PMO) clarified that the Federal Board of Revenue’s (FBR) proposal had received cabinet approval. The government’s decision stemmed from concerns over substantial profits, reportedly around Rs110 billion, earned by banks in 2021 and 2022 through speculative rupee-dollar trading.
Contrary to analysts’ expectations, the potential implementation of the windfall tax could generate over Rs40 billion in revenue for the government.
Justice Sardar Ejaz Ishaq Khan of the IHC has issued notices to the Secretary of the Revenue Division and others for the upcoming hearing. The court’s decision followed a writ petition filed by Askari Bank Ltd against the SRO issued on November 21, which mandated a 40 percent tax on banks’ windfall income calculated using a specified formula.
During the proceedings, the FBR’s legal representative argued that the legislation would remain in effect until otherwise declared. However, the judge acknowledged the petitioner’s argument that interim relief was specifically sought concerning the SRO—an executive act, not legislation.
As a result, Justice Khan ordered, “The foregoing submissions, therefore, demonstrate not only a prima facie case but also that the ingredients of the balance of convenience and irreparable loss operate in favor of the petitioner. Resultantly, the operation of the impugned SRO shall remain suspended until the next date of hearing.”