Tax Payers Alliance Pakistan (TPAP), an initiative of economic think tank PRIME (Policy Research Institute of Market Economy), in collaboration with Law & Policy Chambers organized historic seminar on 9th March 2024 in Islamabad, shedding light on the contentious issue of the Deemed Rental Income Tax levied under section 7E of the Income Tax Ordinance, 2001 vide Finance Act, 2022.

The event brought together a diverse group of experts including economists, lawyers, tax professionals, civil society activists, and academia – attended by huge audience both in person and online - to discuss the detrimental impacts of this tax on the public.

Mr. Umer Ijaz Gilani, Advocate Supreme Court, elucidated the legal intricacies surrounding this tax, while discussing in detail its background and repercussions. He very nicely described the difference between “deemed income” and “non-existent/hypothetical income” to make it easily understandable to even a layman. Mr. Ali Salman, Executive Director PRIME, highlighted the sheer violation of fair taxation principles and the need to protect property rights. Mr. Mahmood Khalid, Senior Research Economist, Pakistan Institute of Development Economics (PIDE) provided insights from a tax policy perspective, and Barrister Junaid Ahmed, joining virtually from Karachi, contributed invaluable insights regarding the implications of this tax for inheritance cases.

The Deemed Rental Income Tax, introduced vide Finance Act 2022, has been under scrutiny for its constitutionality and alignment with public policy. Notably, both the Islamabad High Court (IHC) and Peshawar High Court (PHC) have already declared it unconstitutional, with the matter currently sub judice before the Supreme Court of Pakistan.

The overwhelming consensus among the participants was that the deemed rental income tax, as stipulated under Section 7E of the Income Tax Ordinance, 2001, is not only unconstitutional and ultra vires but also runs contrary to public policy. The arguments put forth during the seminar highlighted the adverse effects of this tax provision on fair taxation principles, property rights protection, and the overall welfare of taxpayers.

Given the compelling evidence presented at the seminar, Tax Payers Alliance Pakistan (TPAP) unequivocally calls for the immediate abolishment of the deemed rental income tax, void ab-initio. TPAP firmly believes that this tax not only violates the fundamental rights of taxpayers but also undermines the principles of fairness and hampers economic growth.

According to Mr. Anas Farhan, Convener Tax Payers Alliance Pakistan (TPAP), this seminar marks a significant step towards advocating for fair and just taxation policies in Pakistan. TPAP has also strongly urged the Government for abolishment of Section 7E, while submitting budgetary proposals to Revenue Division/Federal Board of Revenue (FBR) for the year 2024-25, he said.

Tax Payers Alliance Pakistan (TPAP) is a potent pressure group, comprising citizens of Pakistan from all walks of life to advise, educate and influence the Government and Public Policy in Pakistan to lowering the taxes on businesses and individuals, simplify the taxation regime, and to urge the government to eliminate undue and wasteful expenditures. PRIME Institute (Policy Research Institute of Market Economy) serves as its Secretariat in Islamabad.