Justice Aminuddin Khan. PHOTO: FILE
ISLAMABAD:
The Federal Constitutional Court on Tuesday upheld the validity of the super tax, ruling that Section 4B of the Income Tax Ordinance 2015 would remain in force.
FFC Chief Justice Aminuddin Khan read out the verdict, noting that the detailed judgment will be delivered later, rejecting objections that the case was not maintainable. The Court also confirmed that Parliament has the power to levy taxes by legislation.
The FCC has rejected all petitions challenging the super tax. The court ruled that oil and gas companies must apply individually to the relevant tax commissioner for possible exemptions.
The court rejected High Court rulings that had declared the super tax discriminatory, saying the legislation was legally valid. The court clarified that sections 4B and 4C, which govern the imposition of super tax, are fully in accordance with the law.
He also clarified that the tax would not apply to mudarabah, mutual funds or mutual funds.
The super tax was first introduced in 2015 in Khyber-Pakhtunkhwa to fund the rehabilitation of those affected by terrorism. At that time, an additional 5% super tax was levied on those making annual profits above Rs 300 million. All high courts have upheld its implementation.
In 2022, the super tax was applied to people earning more than Rs 150 million per year, with a maximum rate of 10 percent. Various businessmen, banks and companies have challenged this tax in higher courts, arguing against its retrospective application and the risk of double taxation.
The FCC held 17 hearings on the issue. The case was first heard before the Supreme Court in 2019, when former Chief Justice Umar Ata Bandial was in office.
Following the 26th constitutional amendment, the case was transferred to a constitutional bench, which continued to hear the proceedings. After the 27th constitutional amendment, the case was brought to the Federal Constitutional Court.
Read: Court adjourns hearing on super tax to January 12
Among the representatives who appeared were Hafiz Ihsan Khokhar of the Revenue Department, Dr Shah Nawaz of Karachi Commissioner and Lahore Commissioner Asma Hamid.
Khokar told media that the verdict would bring Rs310 billion to the federal government. “The Federal Constitutional Court has recognized the power of Parliament to legislate,” he said, adding that high courts had previously exceeded their powers.
Khokhar also noted that the court had confirmed that there had been no discriminatory treatment as a result of the super tax.
Super tax
The super tax is an additional levy on high-income individuals, businesses and industries, aimed largely at large corporations. In the Federal Budget 2022-23, the government imposed a super tax of up to 10% on major sectors including cement, steel, sugar, oil and gas, fertilizers, banking, textiles and others, citing the need to generate additional revenue for economic stabilization.
Learn more: Clearly defined super tax amount, businesses must pay: SC
Petitions have been filed in the apex court by individuals and organizations challenging the super tax introduced by the PML-N government in 2015 to raise funds for those displaced by Operation Zarb-e-Azb.
Earlier last year, the top court questioned whether the federal government could distribute super tax revenues to the provinces. Lawyers argued that the levy, introduced in 2016 to fund displaced people, has since been extended, but no funds have been used for the stated purpose.
