ISLAMABAD: The Council of Islamic Ideology (CII) has declared the imposition of withholding tax on financial transactions as un-Islamic, sparking fresh debate over Pakistan’s taxation framework and its alignment with Shariah principles. The decision came during the council’s 243rd session, chaired by Allama Dr Muhammad Raghib Hussain Naeemi, where a wide range of legal, financial and social matters were reviewed.
According to the council, the system of withholding tax — where money is deducted at source on transactions such as withdrawals, transfers and specified payments — places an undue burden on citizens and does not conform with Islamic financial ethics. The announcement directly challenges the prevailing practices of the Federal Board of Revenue (FBR), which currently relies on withholding tax as an advance collection mechanism under the Income Tax Ordinance, 2001 and Sales Tax Act, 1990.
The CII also extended its scrutiny beyond taxation. It opposed proposed amendments to the diyat law (blood money), reiterating that traditional Islamic measures such as gold, silver and camels must remain as lawful compensation. At the same time, the body rejected a recent Supreme Court ruling that mandated iddah (waiting period) and maintenance even in cases where no marital cohabitation had taken place, terming the judgment inconsistent with Quran and Sunnah.
In another significant recommendation, the council gave conditional approval to the idea of human milk banks, stressing that any such initiative must operate under strict legal regulation to prevent misuse. Additionally, it proposed measures to protect religious symbols and inscriptions, suggesting that during the month of Rabbiul Awwal, special tones or calls should remind citizens to show respect to flags and banners carrying sacred words.
The CII’s strong stance on withholding tax may push the government into revisiting aspects of its fiscal policy, especially as pressure mounts to reconcile revenue collection with religious legitimacy. Analysts warn, however, that rolling back such taxes could further strain an economy already struggling with deficits, unless alternative Shariah-compliant frameworks are introduced.
This story has been reported by PakTribune. All rights reserved.