The Pakistan Tax Bar Association (PTBA) has urged the Chairman of the Federal Board of Revenue (FBR) to address what it described as discriminatory enforcement of Section 7E of the Income Tax Ordinance, 2001, relating to the taxation of immovable properties in Punjab and Sindh. According to a news report, the association has raised serious concerns over the unequal application of the law, which it says undermines constitutional guarantees and creates uncertainty for taxpayers.
Section 7E, introduced through the Finance Act, 2022, imposes a tax on deemed income arising from capital assets. Under this provision, owners of immovable properties are subject to a levy calculated at 5% of the fair market value of such assets, regardless of whether the property generates actual income. The measure was intended to broaden the tax base and discourage speculative holding of real estate.
While Section 7E is a federal tax applicable across Pakistan, the PTBA has pointed out that its enforcement has been inconsistent. Taxpayers in Islamabad, Khyber Pakhtunkhwa (KPK), and Balochistan are largely not being pursued for payment of this tax, as various High Courts in these jurisdictions have declared the provision ultra vires, holding that it falls outside the legislative competence of the federal government. In contrast, taxpayers in Punjab and Sindh continue to receive notices and are being compelled to pay the tax, despite similar legal challenges and court rulings.
The PTBA highlighted that High Courts in multiple jurisdictions, including Sindh, Lahore, Islamabad, and Peshawar, have already declared Section 7E to be beyond the scope of federal taxation powers. Despite these judgments, the FBR has continued to enforce the levy in Punjab and Sindh, creating a situation where taxpayers in different provinces are subject to unequal treatment under the same federal law. The association noted that such selective enforcement raises serious constitutional questions and erodes confidence in the tax administration system.
According to the PTBA, the continued issuance of notices in Punjab and Sindh, while taxpayers elsewhere enjoy relief, violates fundamental rights guaranteed under the Constitution of Pakistan. The association specifically cited Articles 4, 8, 10A, and 25, which ensure the right to be treated in accordance with law, protection against unlawful actions, the right to fair trial and due process, and equality before the law. The PTBA argued that a federal tax cannot be selectively applied based on geographic location, particularly when courts have already questioned its legality.
The association has called on the FBR to immediately ensure uniformity in enforcement and to refrain from pursuing taxpayers in provinces where relief has been granted by the courts. It emphasized that until a final decision is rendered by the Supreme Court of Pakistan, the FBR should respect existing High Court judgments and avoid creating further disparities among taxpayers.
The matter remains unresolved as the Supreme Court has yet to issue a conclusive ruling on the validity of Section 7E. However, the PTBA noted that the apex court has not suspended the operation of High Court judgments that declared the provision ultra vires. As appeals are now pending before the Federal Constitutional Court, the association stressed the need for consistency and restraint in enforcement to prevent further legal complications and taxpayer distress.
The PTBA’s intervention underscores growing frustration within the tax community over uncertainty in property taxation and the perceived lack of coherence in tax policy implementation. Tax experts warn that continued selective enforcement could discourage compliance, increase litigation, and weaken trust between taxpayers and revenue authorities. As the legal process continues, the association’s call for fairness and uniform application of the law remains central to the broader debate on constitutional taxation and federal authority.
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