KARACHI: Mian Zahid Hussain, President of the Pakistan Businessmen and Intellectuals Forum and Chairman of the National Business Group Pakistan, has raised significant concerns following the Federal Constitutional Court's recent decision to uphold the Super Tax under Sections 4B and 4C of the Income Tax Ordinance. The ruling is expected to result in a recovery of approximately Rs. 300 billion from the formal business sector. Hussain warned that the enforcement of this tax could lead to severe liquidity challenges and stifle industrial growth.

According to a press release from [email protected], Hussain emphasized that the sudden recovery of Super Tax arrears, applied retroactively from 2015 on high-earning sectors, would elevate the corporate tax burden to unsustainable levels. When combined with the standard 29% corporate tax and other levies, the effective tax rate for compliant industries could exceed 50%. Hussain argued that exporters, who previously settled their tax liabilities under a fixed regime, should not be subjected to this retrospective tax charge.

Hussain cautioned that the formal sector, which is already crucial to meeting the country's revenue targets, is being unduly penalized. He highlighted that vital sectors such as textiles, pharmaceuticals, fertilizers, and banking are at risk, as the decision could drain the retained earnings necessary for reinvestment and expansion.

The business leader pointed out specific challenges for various industrial sectors. High energy tariffs and delayed refunds have already burdened the textile and export sectors, and the additional tax liability could further depress export volumes. Large-Scale Manufacturing is also affected, with the harsh recovery methods potentially deterring both local and foreign investment due to policy unpredictability. Pharmaceuticals and fertilizers, which operate under regulated pricing mechanisms, may lack the profit margins to absorb the additional tax.

Hussain urged the government to exercise caution in recovering Super Tax arrears and suggested a shift in focus towards broadening the tax base to include retail, real estate, and agriculture. He warned that continued reliance on Super Taxes and surcharges could result in declining Foreign Direct Investment and capital flight. Hussain called for immediate dialogue with the Federation of Pakistan Chambers of Commerce and Industry (FPCCI) to establish a payment mechanism for past liabilities, proposing installment options and potential discounts to avert widespread defaults and industrial closures.