Company lawyers conclude arguments at FCC supertax case hearing
ISLAMABAD:
Lawyers for exporters and tobacco companies argued Monday before the Federal Constitutional Court (FCC) that excessive taxation was forcing companies to leave the country. »
A three-member bench of the FCC, headed by Chief Justice Amin-ud-Din Khan, has resumed hearing the super-tax case at its temporary premises, the Islamabad High Court (IHC).
During the hearing, counsel for various exporting companies, Rashid Anwar, completed his arguments, while Ijaz Ahmed, representing the tobacco companies, also concluded his arguments.
Lawyer Anwar told the court that the IHC had previously ruled that tax could not be levied at less than 15 per cent or more than 55 per cent.
However, he argued, taxes exceeding 55 percent are currently being collected. He argued that excessive taxation was forcing businessmen to relocate their operations to low-tax jurisdictions like Dubai, as current tax rates leave little room for profit.
He said exporters currently pay up to 61 percent in taxes. Lawyers for the tobacco companies argued that out of a retail price of Rs 130 per packet of cigarettes, Rs 98 is levied as tax, while a packet sold at Rs 48 attracts a tax liability of Rs 40.
Responding to these claims, Federal Board of Revenue (FBR) lawyer Asma Hamid said the figures presented by the petitioners did not match the official documents. The petitioners also argued that the government had selectively imposed a super tax on certain sectors while exempting others.
Justice Amin-ud-Din Khan observed that it is left to the discretion of the government to include or exclude any sector from the tax. The petitioners argue that tax classification should be based on income rather than sectors of activity.
The court noted that if the tax was imposed only on income, a sectoral classification would not be possible. The hearing was adjourned and will resume today.
The controversy surrounding Sections 4B and 4C of the Income Tax Ordinance, 2001 constitutes one of the most significant tax and constitutional disputes in Pakistan’s recent history.
This has revenue implications running into hundreds of billions of rupees and raises fundamental questions about the taxing power of Parliament, equality before the law and the scope of judicial review in tax matters.
Section 4B was introduced by the Finance Act, 2015, imposing a “super tax” on high-income earners, particularly banking companies and others earning income above Rs 500 million.
Hafiz Ahsaan Ahmad Khokhar, counsel for the Federal Board of Revenue (FBR), while describing the background of the case, told The Express PK Press Club that the levy was initially justified as a temporary tax measure to generate funds for the rehabilitation of temporarily displaced persons.
