A constitutional bench of the Supreme Court wondered about Wedensday if the super tax could be imposed on an already taxable income.
A bench of five members, led by Judge Amicin Khan, heard a set of pleadings contesting the taxation of super taxes by the government of Pakistan Muslim League-Nawaz (PML-N) in 2015.
“How to impose a super tax on a system that is already subject to tax?” asked judge Jamal Khan Mandokhail.
The lawyer for the petitioners Férogh Naseem informed the court according to which once the income is evaluated, a super tax or an supplement could apply. “For example, if an account is opened in January 2021 and closed on December 31, 2021, a tax is still imposed six months later, even if the taxpayer had already paid for it.”
He added that the law made a great tax applicable on income but did not describe it as an additional levy anywhere. “Article 4C of the income tax order – the provision which introduced the super tax in 2022 – does not mention additional tax, and a taxpayer may choose to pay under article 4 (general tax) or article 4C (super tax) of the law,” he said.
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Judge Mandokhail supported more: “Where does this option come from?” Naseem replied that it was a general principle that a taxpayer could choose one of the two identical provisions under which paying tax.
The judge compared the question to criminal law. “It is like when two sections apply to a crime – the punishment will be granted under the section bearing the smallest penalty.”
“Exactly – the same principle also applies here. The double taxation cannot be imposed,” said Naseem.
Judge Mandokhail, highlighting Naseem’s political history, asked: “You were a member of the Parliament. Tell us, who writes this legislation?”
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“I did not write section 4C,” joked Naseem.
The bench has also examined the deductions of provident funds, noting concerns about their impact on citizens and ordinary beneficiaries.
The hearing was adjourned until Thursday, Naseem who should continue his arguments.
The Supreme Court takes place to conclude the question before October 7, when the hearings on the challenges of the 26th constitutional amendment should begin. Judge Amicin Khan quickly underlined the urgency to conclude arguments.
Super taxes
The Super Tax is an additional direct debit on individuals, companies and high industries, intended for large companies. In the federal budget of 2022-2023, the government has imposed up to 10% super taxes on the main sectors, including cement, steel, sugar, oil and gas, fertilizers, banks and textiles, citing the need to increase additional income for economic stabilization.
Petitions contesting the levy were filed before the Superior Court by individuals and organizations.
During a previous hearing, the bench was informed by the Federal Board of Revenue (FBR) according to which no one had challenged the verdict of the High Court of Lahore (LHC), confirming the legality of the super tax imposed under article 4C of the income tax order, including the bank and offering partial repair to the petitioners.
Earlier this year, the Apex Court wondered if the center could distribute subsequent tax revenue to the provinces, noting that if the levy has been extended since 2016, no funds had been used for the declared objective.
FBR has set up a defense of the powers of the Parliament. Lawyer Hafiz Ehsan Khokhar argued that if article 14 of the finance law had seen his objective modified, his substance has remained intact.
He rejected the allegations of legislative surpassing, citing the case 63-A, but judge Mandokhail pressed whether the parliament could constitutionally adopt a tax invoice outside the annual budgetary cycle. The judges also reported contradictions in the decision of the High Court of Islamabad which had partly canceled the levy.
The bench in a subsequent hearing then turned to the provident funds, the lawyer for the FBR Asma Hameed arguing that a partial repair had already been provided. Judge Hasan Azhar Rizvi warned that Taxer RS100 today could mean that RS550 has lost for retirees from decades later. The judges also asked how super taxes had been calculated when the profits were unknown.
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Earlier, Sep 25 “whether it is a bag of cement or an expedition of LNL, the whole burden returns to the ordinary man,” observed Judge Muhammad Ali Mazhar.
The judges examined the deductions of provident funds and asked if the widows were among the final beneficiaries. Lawyer Asma Hameed argued that articles 4C and 9 of the order should be read together, but the bench explained why taxpayers were treated differently.
Previously, the bench examined the logic of the government’s “profits of the windfall”. Judge Rizvi asked whether routine price increases – gasoline from RS150 to RS200 or RS10 sugar – could be treated as extraordinary benefits.
Lawyer Ahmed Jamal Sukhera said the levy has only cited a few sectors and raped constitutional guarantees. The judges also noted that the companies of the loss state such as PIA and Pakistani steels were inexplicably included in the list of tax supers.
The procedure began on September 19, when broader questions of legislative procedure dominated. Judge Mandokhail asked if parliamentarians have really debated taxes before approving them. Taxpayers’ lawyer argued that the role of FBR was only to collect taxes, not design policy, which should ideally involve experts. Judge Rizvi wondered if the legislators were simply rubber bills without considering their impact.
