Blow to government: Workers’ Welfare Fund is not a tax, SC rules
Contributions may now be distributed among the provinces for the welfare of employees
PHOTO: EXPRESS
ISLAMABAD:
The federal government suffered a setback on Thursday after the Supreme Court decreed that contributions made to the Workers’ Welfare Fund (WWF) were, by nature, not a tax.
The three-judge bench, headed by Justice Mian Saqib Nisar, declared that the Workers’ Participation Fund was basically a profit-sharing plan, giving employees a share in the company’s profits, with the primary aim to give the employees a sense of ownership and greater participation in the company.
These contributions are for a specific purpose – a plan for the benefit of employees, much like other investment plans and, therefore, did not qualify as a tax.
The Federal Board of Revenue annually collects Rs20 billion from private companies under the head of Workers Welfare Fund. After the top court’s declaration, the contributions made to the fund may be distributed among the provinces for the welfare of employees.
Raheel Kamran Sheikh, counsel for one of the petitioners, told The Express Tribune that after the 18th Amendment, concurrent legislative lists were abolished and subjects devolved to the provinces. So far, he maintained, the provinces had not taken any measure for the collection of the fund.
Justice Mian Saqib Nisar stated: “We fail to understand how the requirement of payment of minimum wages to unskilled workers can be construed as a tax, thereby permitting any amendments made to the Ordinance of 1969 to be effected through a Money Bill.”
The court held that the compensation payments made under the Act of 1923 were not a common burden exacted to meet the general expenses of the state, instead they were particular payments made for a very specific purpose: to compensate workmen injured in the course of employment, therefore, they cannot be said to be a tax.
“The subject contribution is gratuity payments. What is gratuity? Basically, it is a lump sum payment made by the employer to an employee at the end of his service (either by retirement or termination for reasons other than misconduct) as a mark of recognition for the latter’s service. In other words it is a defined benefit plan. These payments made by employers are very specific as opposed to having a generic purpose to meet the state’s expenses and can, therefore, by no stretch of imagination be referred to as a tax”
“The subject contributions/ payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill – the Finance Acts of 2006 and 2008 – as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution.”
“The Act of 1968 provides for companies (to which the Act apply) to establish a Workers’ Participation Fund and make annual payment of five per cent of its profits during the year to the said fund to provide benefits that accrue from it to eligible workers.”
Published in The Express Tribune, November 11th, 2016.
The federal government suffered a setback on Thursday after the Supreme Court decreed that contributions made to the Workers’ Welfare Fund (WWF) were, by nature, not a tax.
The three-judge bench, headed by Justice Mian Saqib Nisar, declared that the Workers’ Participation Fund was basically a profit-sharing plan, giving employees a share in the company’s profits, with the primary aim to give the employees a sense of ownership and greater participation in the company.
These contributions are for a specific purpose – a plan for the benefit of employees, much like other investment plans and, therefore, did not qualify as a tax.
The Federal Board of Revenue annually collects Rs20 billion from private companies under the head of Workers Welfare Fund. After the top court’s declaration, the contributions made to the fund may be distributed among the provinces for the welfare of employees.
Raheel Kamran Sheikh, counsel for one of the petitioners, told The Express Tribune that after the 18th Amendment, concurrent legislative lists were abolished and subjects devolved to the provinces. So far, he maintained, the provinces had not taken any measure for the collection of the fund.
Justice Mian Saqib Nisar stated: “We fail to understand how the requirement of payment of minimum wages to unskilled workers can be construed as a tax, thereby permitting any amendments made to the Ordinance of 1969 to be effected through a Money Bill.”
The court held that the compensation payments made under the Act of 1923 were not a common burden exacted to meet the general expenses of the state, instead they were particular payments made for a very specific purpose: to compensate workmen injured in the course of employment, therefore, they cannot be said to be a tax.
“The subject contribution is gratuity payments. What is gratuity? Basically, it is a lump sum payment made by the employer to an employee at the end of his service (either by retirement or termination for reasons other than misconduct) as a mark of recognition for the latter’s service. In other words it is a defined benefit plan. These payments made by employers are very specific as opposed to having a generic purpose to meet the state’s expenses and can, therefore, by no stretch of imagination be referred to as a tax”
“The subject contributions/ payments do not constitute a tax is sufficient to hold that any amendments to the provisions of the Ordinance of 1971, the Act of 1976, the Act of 1923, the Ordinance of 1968, the Act of 1968 and the Ordinance of 1969 could not have been lawfully made through a Money Bill – the Finance Acts of 2006 and 2008 – as the amendments did not fall within the purview of the provisions of Article 73(2) of the Constitution.”
“The Act of 1968 provides for companies (to which the Act apply) to establish a Workers’ Participation Fund and make annual payment of five per cent of its profits during the year to the said fund to provide benefits that accrue from it to eligible workers.”
Published in The Express Tribune, November 11th, 2016.