ON June 29, the Punjab Provincial Assembly passed the Punjab Finance Act 2013; under Section 10 of this law a certain ‘luxury tax’ has been imposed on residential houses within a specific region, measuring two kanals or above.

This new luxury tax requires payment of Rs500,000 by the owners of houses measuring two kanals or above; Rs1m for four kanals and above; and Rs1.5m for eight kanals and above. It will be recovered from all current houses and shall be obtained every time such houses are constructed or change ownership.

At first glance the idea seems interesting: to tax the ‘luxury’ enjoyed by the wealthy through living in their lavish homes with large gardens and private tennis courts. It does seem justified that these luxuries are being taxed in order to help avert the financial crisis of our nation. But is it?

Alas, the truth is very different, the reality much bleaker and the situation quite complex. In fact many people living in such houses either acquired them at the time of partition or inherited them; others purchased them in better days, when their businesses were flourishing; brothers bought a single large house together instead of multiple smaller ones. Neither are they flourishing businessmen, nor are they extremely wealthy.

Many people living in such houses do so out of sentiment, while others plan to sell them when their kids grow up, holding them as security against educational expenses.

With businesses failing in Pakistan, job opportunities dwindling and costs of living skyrocketing, they are barely holding on to their homes, hoping that tomorrow might bring a better day. Alas; tomorrow has brought them the luxury tax!

A luxury is defined as some expensive yet unnecessary thing that adds to one’s enjoyment of life. A house is a necessity, and many people living in these large houses are indeed there merely out of necessity. A lot of people with large families still live together jointly and therefore need a larger place to live, not out of luxury but necessity.

A lot of large houses can be seen in crumbling condition, unpreserved and barely standing, yet people live there not out of choice but out of necessity. You do not see large cars in their driveways; you see beat-up old cars, cars that are remnants of a prosperous past, now crumbling away along with everything else in their lives.

For those able to pay, these taxes are not bothersome. But many people cannot afford them. For them paying the tax may mean selling the car or dipping into the savings account.

Furthermore, many cases of incorrect charging have come forward: Rs1m are being charged for properties much less than four kanals. Widows, who are exempted from this tax, are being charged with the same.

From a legal perspective, the provisions of Section 10 of the Act are illegal, arbitrary and discriminatory under Articles 8, 23, 24 and 25 of the Constitution.

They are discriminatory and arbitrary because they only target a specific region, not affecting properties of similar nature otherwise. They are illegal because laws cannot be made to have retrospective effect, ie a law cannot create a liability on an act done in the past.

The luxury tax is applied to the construction of large houses, but it cannot, legally, be applied to houses already built as the owners of such houses would and could not have known of this tax when they constructed them.

Furthermore, the Government of Punjab, by virtue of the Punjab Urban Immovable Property Tax Act, 1958, continues to levy and collect property tax which is payable on the annual value of the property as is subjectively assessed by the assessing authority.

This is compulsorily exacted from the citizens and, unless exempted, all immovable properties are amenable to property tax. Payment of an additional tax, noticeably called a luxury tax on houses (houses being a necessity, not a luxury) amounts to double taxation, which is prohibited by law.

Furthermore, in accordance with the law, for the purpose of taxation the person’s capacity and ability must be assessed before levying it. The luxury tax is an additional, compulsory exaction of money from the public with disregard to the ability of the taxpayer to pay.

The incidence and levy of this tax is therefore against the underlying theory of beneficial taxation which entails that whilst taxing, subjective considerations need assessment, ie the person’s capacity to pay, in addition to the nature and size of the property being taxed.

According to lawyer Umer Ali Khan who is working on a petition against its imposition, this tax is also oblivious to the possibility of the residential property being inherited by such individuals who cannot afford to pay it. An inability to pay this tax would entail repercussions and eventuate forceful sequestration of the property in stark violation of fundamental rights.

Therefore, it is sufficient to say that the imposition of this luxury tax is a prime example of bad lawmaking and many people will suffer if it continues to remain in force. It needs to be struck down or severely redrafted; a number of writ petitions have already reached the honourable Lahore High Court seeking justice, pleading that this discriminatory law be struck down.

Thus, it now rests with the honourable Lahore High Court to use its constitutional powers and save the day.

The writer is an advocate.

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