Super tax saga

2026-01-29 - 01:51

AFTER a long running legal battle, the Government got a major relief on Tuesday when the Federal Shariah Court (FCC) upheld imposition of super tax, affirming the parliament’s authority to legislate on taxation. In a short order, a three-member bench, headed by FCC Chief Justice Aminuddin Khan and also including Justice Syed Hasan Azhar Rizvi and Justice Syed Arshad Hussain Shah, the court set judgments of high courts on the subject, which were found to have exceeded their jurisdiction. The verdict has far-reaching constitutional and financial implications and will surely go a long way in strengthening the concept of trichotomy of power. There is a growing tendency to challenge taxation matters in courts and get stay orders, effectively undermining power of the parliament to legislate and creating obstacles in the smooth collection of dues. Cases involving hundreds of billions of rupees remained pending with different tiers of the judiciary prompting the Prime Minister to appeal to the Chief Justice of Pakistan to intervene. The decision of the FCC has set a tradition that will discourage the practice of non-payment of taxes using the shoulders of the judiciary. The court disposed of over 2,200 long-pending tax cases concerning sections 4(b) and 4(c) of the Income Tax Ordinance 201, safeguarding an estimated Rs310 billion in public revenue. The cases pertained to tax levies under Section 4(b) for Tax Year 2015 and Section 4(c) for Tax Year 2022. While Section 4(b) had largely been upheld, Section 4(c) had been read down or struck down in some high court rulings on grounds of alleged retrospectivity, discrimination and double taxation. The FCC held that courts cannot re-determine tax slabs, rates, thresholds, or fiscal policy, and that high courts committed judicial overreach, violating the doctrine of separation of powers. All appeals filed by the Federal Board of Revenue (FBR) Secretary and Inland Revenue commissioner were confirmed as maintainable. The verdict has come at a time when FBR is finding it difficult to realize tax targets for the ongoing year as per commitments with the International Monetary Fund (IMF). The tax collector expects to realize Rs. 150 to 200 billion during the ongoing quarter to minimize the tax shortfall, obviating the need for a mini budget or shifting of additional burden on the existing tax payers. However, it is also a fact that despite imposition of taxes on the general public or some specific segments of the society, the due amount never reaches the coffers of the Government in full and is pocketed by the collecting agencies. In a shocking disclosure, the Government informed the Public Accounts Committee (PAC) that a large number of companies had failed to deposit the petroleum levy, resulting in significant losses to the public exchequer. Similarly, reports indicate the state-run PTV never got full license fee amount collected through electricity bills despite the fact it was as simple a matter as two and two make four. Investigations would reveal similar frauds in scores of other departments and agencies authorized to collect federal or provincial taxes. There are reasons to believe that the Government will not need to impose any new tax or increase the rate of the existing ones if the amount charged to the end consumer/customer is honestly deposited in relevant government accounts. As for the negative implications of the FCC ruling, the parliament definitely has the power to legislate but there are legitimate concerns that the practice of stamping approval to measures aimed only at minting money at the cost of their impact on investment and cost of doing business amounts to axing your own feet. Again, the tendency to continue indefinitely with taxation measures originally meant for one time or for a specific period must also be curbed as it is sheer exploitation.