IBC says cost of access to justice to exacerbate

Bar rejects 16% sales tax on services of lawyers

ISLAMABAD: Imposition of 16% sales tax on services of lawyers will further increase the cost of access to justice, Islamabad Bar Council (IBC) said.

IBC strongly condemns the imposition of 16% sales tax on the services of lawyers in the Islamabad Capital Territory, the bar said in a statement on Monday. “We, therefore, ask the federal government to immediately withdraw the imposition of 16% sales tax on the services of lawyers in the ICT,” it said.

IBC has expressed reservations over imposing Islamabad Capital Territory (Tax on Services) Ordinance, 2001 (XLII of 2001) has been amended through The Finance Act, 2019 whereby sales tax at the rate of 16% has been imposed on the services of lawyers in the ICT.

Levying tax on lawyer will increase the cost of access to jusitice, it said. Services provided by the lawyers to litigants are distinguishable from other services as they relate to the basic and fundamental right of the citizens — right to inexpensive and expeditious justice.

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Therefore, they cannot be treated at par with other services regarding which the state can impose sales tax. The bar quoted articles of constitution to support their argument against 16% sales tax.

Lawyers already discharge their obligation to pay tax in the form of income tax which has progressive taxability with increasing income, the bar said. Imposition of sales tax on services of lawyers will also make the lawyers withholding agents for collecting sales tax of litigants and depositing the same with the FBR; which amounts to 'forced labour' which is also prohibited under Article 11 of the Constitution of Pakistan.

Expert opinion

Tax law expert Adnan Haider Randhawa Advocate said imposing 16% sales tax on litigants who consume services of lawyers will make justice unbearably expensive for people who are already victims of dysfunctional justice system. Even more disturbing for lawyers is FBR’s casual way of shifting its responsibilities on lawyers by making them its withholding agents against their will and that too without any remuneration. Next step will be to collect litigants’ sales tax from lawyers, impose default surcharge and penalties on them and even prosecute lawyers for not collecting sales tax which is FBR’s job. “Why does FBR not do its job itself and collect sales tax from litigants directly?” he said.

Pakistan Bar Council Executive Committee Chairman Hafiz Idrees said that 16% sales tax will be levied on litigants. The matter has also come up in Punjab. There is a restraining order of Lahore High Court in this regard, but the federal capital's lawyers will have to approach the Islamabad High Court separately, he said. FBR cannot collect withholding tax directly from the litigants. The service provider always collects this tax, Idrees said. 

Published in The Express Tribune, July 30^th, 2019.